President Biden Issues Executive Order on Non-Competition Agreements – No Immediate Changes on the Horizon

By: Kopka Pinkus Dolin

On July 9, 2021, President Biden issued the anticipated Executive Order on Promoting Competition in the American Economy. (Click here for Order) We previously discussed what this order could mean for non-competition agreements and other restrictive covenants in Wisconsin. (Click here for article)

Now that the Executive Order has been revealed, we can see that it has not made any immediate changes to the state of the law on non-competition agreements in Wisconsin, or across the Country. While the Order includes 72 initiatives by more than a dozen federal agencies to address perceived competition issues in the economy, the order does not change the law.

Generally, the order “encourages”:

• The Federal Trade Commission (FTC) to ban or limit non-compete agreements.
• The FTC to ban unnecessary occupational licensing restrictions that impede economic mobility; and
• The FTC and Department of Justice to strengthen antitrust guidance to prevent employers from collaborating to suppress wages or reduce benefits by sharing wage and benefit information with one another.

Because the Order only encourages the FTC to ban or limit non-compete agreements, any large scale restrictions would need to be implemented by the FTC through formal rule making, which is a much slower process.

It is also important to note that the Order does not just apply to non-competition agreements. Inclusion of the phrase “and other clauses or agreements that may unfairly limit worker mobility” leads us to believe that the Order would likely apply to the other standard restrictive covenants discussed in our previous article (for example, clauses or agreements relating to non-disclosure of confidential information, non-solicitation of employees, and restriction on soliciting customers).

Additionally, the chosen language, “unfairly limit” suggests that a complete ban on restrictive covenants is unlikely to be seen in the future. More likely, any future limits on non-competition agreements would be limited to those that would be viewed as “unfair”. Many states, including Wisconsin, already look to invalidate overbroad and overinclusive restrictive covenants.

While the FTC’s reaction to the Executive Order should be monitored, a major overhaul to law on non-competition agreements does not appear to be forthcoming. Wisconsin employers can still follow guidance provided by the state courts and understand that such agreements will continue to be closely scrutinized.

The employment attorneys at Kopka Pinkus Dolin PC’s Wisconsin office can assist employers with reviewing their restrictive covenants and revising if necessary to ensure their enforceability to protect business interests. The law has developed and changed over the years, so your current agreements may not reflect the correct legal landscape.

Please contact Kopka Pinkus Dolin for any comments or questions.