President Biden recently issued an Executive Order, referred to as the Executive Order on Promoting Competition in the American Economy, on July 9, 2021. The Order contains seventy-two policy objectives across numerous federal agencies, which are aimed at advancing competition. Per the Order, President Biden is urging federal agencies, the Federal Trade Commission (“FTC”) in particular, to “ban[] or limit[] non-compete agreements.” Fact Sheet: Executive Order on Promoting Competition in the American Economy, White House Press Release, July 9, 2021 (https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/).
Historically speaking, states have been in charge of fashioning rules and regulations governing contracts, including non-compete agreements. For example, Wisconsin law requires reasonableness in the scope of restrictions imposed by a non-compete with respect to the type of activities to be restricted, the territorial limitations, and the time limitations. Star Direct, Inc. v. Dal Pra, 2009 WI 76, ¶ 20 (citing Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157, 162-67 (1959)). President Biden’s Executive Order does not specify what limitations the FTC should consider with respect to non-compete agreements, but one of his stated objectives is to prevent American businesses from unfairly limiting worker mobility.
While it seems likely that the FTC will consider using its authority to create new federal limitations on the scope of non-competes, an all-out ban on the clauses does not seem to coming. It is noteworthy that the Order encourages banning or limiting unfair non-compete agreements, which is a slight deviation from President Biden’s pre-inauguration campaign platform which called for a sweeping ban on non-compete agreements. Additionally, should the FTC decide to create new rules relating to non-competes, the administrative rulemaking process may take months or years to promulgate new regulations. This means that, for the time being, non-compete agreements will continue to be regulated and analyzed pursuant to state law. First, Albrecht & Blondis, S.C. remains prepared to discuss the changes and the rights of employees in light of those changes with our clients and prospective clients.