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President Biden Issues Executive Order Regarding Non-Competition Agreements, Right to Repair, and Other Matters

On July 9, 2021, President Biden issued an executive order regarding the promotion of competition in the American economy (the “Executive Order”).  In the sweeping Executive Order, President Biden encouraged various agencies, including the FTC, and the newly established White House Competitive Council, to further the Biden administration’s policy “to enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony.”  While not all businesses approach the status of a monopoly, the Executive Order may spur a confluence of federal legislative and regulatory action that can impact small- and medium-sized businesses with regard to employment agreements and other agreements commonly utilized in certain mergers, acquisitions, and asset sale agreements.

What does the Executive Order say?

As noted in the White House’s fact sheet regarding the Executive Order, the Executive Order encourages the FTC to ban or limit non-compete agreements, among other things.  Specifically, in Section 5(g) of the Executive Order, President Biden encourages the Chair of the FTC “to exercise statutory rule making authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility” to address limitations on workers’ ability to change jobs.  Further, the Executive Order encourages the Attorney General and the Chair of the FTC to “consider whether to revise the Antitrust Guidance for Human Resource Professionals of October 2016” “to better protect workers from wage collusion.”

In addition to non-compete agreements, the Executive Order encourages the FTC to exercise its statutory rulemaking authority to address restrictions on “third-party repair or self-repair of items, such as the restrictions imposed on powerful manufacturers that prevent farmers from repairing their own equipment.”  The Executive Order also seeks “[t]o ensure Americans have choices among financial institutions,” by encouraging the Attorney General, the Chairman of the Board of Governors of the Federal Reserve System, the Chairperson of the Board of Directors of the FDIC, and others to “review current practices and adopt a plan . . . for the revitalization of merger oversite under the Bank Merger Act and the Bank Holding Company Act.” 

What does the Executive Order mean for you and your business?

Although the Executive Order does not create any enforceable rights or benefits, the Executive Order illuminates the policy position of the Biden administration to take aim at non-compete agreements and other matters affecting competition in the economy.  Non-compete agreements, which are commonly used in employment contracts and contracts executed in connection with the sale of a business or its assets when a business and its employees are privy to trade secrets and other proprietary information, are largely governed by state law; however, the Biden administration has made clear its intention to “stir up” the current state law landscape through the intervention of federal oversite and rulemaking with regard to non-compete agreements.  The Executive Order also illustrates the Biden administration’s commitment to the “right to repair” to enable farmers to repair the machinery used on their farms, and the retention of smaller, more local banks and financial institutions to increase consumer- and borrower-choice.  As of right now, the Executive Order serves as a policy directive to various administrative agencies, but in the near future could affect the enforceability of certain business and employment contracts, in addition to a multitude of other issues and industries.

MVP will be following and reporting on the White House Administration’s measures to implement its policies. If you have any questions, please reach out to our Business Litigation and Transactions Attorneys

Disclaimer and warning: This information was published by McAnany, Van Cleave & Phillips, P.A., and is to be used only for general informational purposes and should not be construed as legal advice or legal opinion on any specific facts or circumstances. This is not inclusive of all exceptions and requirements which may apply to any individual claim. It is imperative to promptly obtain legal advice to determine the rights, obligations and options of a specific situation.