Week 5: Discussion: Non-Competition Agreements
Read the prompt below and answer questions 1 and 2. Your initial posting should be roughly 100-200 words in length. Review materials and videos and use materials as sources.
On July 9, 2021, President Biden signed an executive order supporting limitations on the use of non-compete clauses. Styled as “promoting competition,” the order encourages the Federal Trade Commission to act to limit employee non-compete clauses as well as any “other clauses or agreements that may unfairly limit worker mobility.” While this order doesn’t effectuate any immediate changes in the law, it comes after an FTC examination of non-competes last year and after the Obama administration issued similar criticisms of such clauses years ago. In the intervening time, several states have changed their laws on regulating them, and it remains to be seen how this most recent Order will impact the legal landscape.
Regulation of non-compete and other related clauses is not without criticism. It is unclear how the FTC may act in response to this order, and the scope of their power to regulate non-competes will certainly be the subject of litigation. The FTC may engage in rulemaking to restrict these clauses in response to the administration’s vow to ban them altogether, and it is unknown as to whether the agency will seek a total ban, or something more narrowly tailored as many states have enacted. In addition, as the language of the executive order is broader than just non-competes, the FTC may seek to regulate other contract provisions like non-solicitation, no-rehire, and other restrictive covenants. As such provisions affect over half of American businesses, this changing area of the law may have broad-ranging consequences for employers.
TASK
- Do you think companies should be allowed to negotiate non-competition agreements? Why or why not?
- Should the federal government dictate this area, or should it be up to individual states to legislate non-competition agreements under state law?
