President-elect Joe Biden has issued a “Plan for Strengthening Worker Organizing, Collective Bargaining, and Unions” on his website, and it includes an interesting statement about what his incoming administration purportedly intends to do about non-compete and no-poach agreements:
Eliminate non-compete clauses and no-poaching agreements that hinder the ability of employees to seek higher wages, better benefits, and working conditions by changing employers. In the American economy, companies compete. Workers should be able to compete, too. But at some point in their careers, 40% of American workers have been subject to non-compete clauses. If workers had the freedom to move to another job, they could expect to earn 5% to 10% more—that’s an additional $2,000 to $4,000 for a worker earning $40,000 each year. These employer-driven barriers to competition are even imposed within the same company’s franchisee networks … As president, Biden will work with Congress to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets, and outright ban all no-poaching agreements.
It is unclear what “narrowly defined category of trade secrets” this would encompass, but regardless it goes much further than the “Call to Action” that the Obama Administration (in which Biden was, of course, the Vice President) issued in 2016, in that it would purportedly abolish noncompete agreements outright, rather than just limit them. It also goes further than the “Freedom to Compete Act” that Florida Senator Marco Rubio proposed early last year. And as our friend Russell Beck points out, the economic data cited in Biden’s statement is dubious at best. Moreover, given that no-poach agreements are an entirely different animal than post-employment non-competes, it is unclear why Biden combined the two in his statement, but to the untrained eye it may seem as though they are one and the same.
Biden was apparently instrumental in the Obama Administration issuing its 2016 “State Call to Action on Non-Compete Agreements” and accompanying report entitled “Non-Compete Reform: A Policymaker’s Guide to State Policies” (which relied heavily on our 50 State Desktop Reference: What Employers Need to Know About Non-Compete and Trade Secrets Law) in which the Obama Administration encouraged state legislatures to adopt policies to reduce the misuse of non-compete agreements and recommends certain reforms to state laws, so his recent statement should come as no surprise. As we reported at the time:
Indeed, on the same day that the White House issued its report, Vice President Joe Biden posted a lengthy message on his Facebook page, linking to a White House survey that encourages employees to share with the administration “how non-competes agreements or wage collusion are holding you down.” The Vice President expressed concern in his post about “the improper use of non-compete agreements, where companies make workers promise when they are hired that if they leave the company, they can’t work for another company in the same industry,” and noted that “these agreements can create unnecessary roadblocks for any worker trying to get a raise, looking to move up the ladder by joining another employer, or even start their own company.” He concluded by promising that “the President and I will continue to fight for the dignity and respect of hardworking Americans,” including “put[ting] forward a set of best practices and call to action for state legislators to make progress on reforms to address the misuse of non-competes.”
Whether a Biden Administration can succeed in abolishing non-competes is altogether another question. It would have to do so either through legislation it proposes and Congress passes, or regulatory action. Passing such a law through Congress seems unlikely, in particular if Republicans can maintain their majority in the Senate, and it is unclear whether the Federal Trade Commission or other regulatory agencies even have the authority to enact such sweeping reforms in this area. That said, and as we have previously written, the FTC has been hosting workshops considering its authority to ban non-competes.
Abolishing non-competes by any means would effectively bring the rest of the country in line with California, which nearly all other states and the District of Columbia have been unwilling to do (although, as Russell Beck further points out, DC is now attempting to do so). Indeed, even in Massachusetts, which is not known as being particularly pro-employer, the state legislature was only able to agree on a watered-down compromise bill (after 10 years of debate) that effectively codified the common law and limited the use of non-competes with certain classes of employees. Other employee-friendly states, including Washington, have similarly rejected outright bans on non-competes, but have placed certain monetary thresholds (and notice requirements) in order for non-competes to be enforceable. If the vast majority of states don’t want to abolish non-competes—the last time a state passed such a ban was in 1890—why should the federal government step in to do so?
In any event, there can be no debate that abolishing non-competes at the federal level would upend over 200 years of state law and have major impacts across all industries, limiting employer’s options to protect trade secrets and customer goodwill. As such, it is reasonable to assume that significant lobbying and Congressional hearings would occur before any noncompete bill would reach Biden’s desk. We will continue to monitor the situation and report back with any updates.
