President Biden's executive order earlier this month calling on the Federal Trade Commission to ban or restrict non-competitive agreements, which puts curbs on former employees who go to work for competitors, is accelerating ongoing work on the issue, experts say.
No immediate immediate action is likely due to the July 9 order, which raised many other issues, but experts advise employers to prepare for future developments by examining their use of the contracts.
An FTC spokeswoman said in a statement that non-compete "has been an ongoing concern" for the agency and although it has not announced any new initiatives since the president's executive order, "I expect that we will do something further in this space, and the issue is really on our radar. ”
Experts point out that non-tender agreements prohibiting departing employees from requesting their former customers as well as agreements enforcing the protection of business secrets are not affected by the executive order.
While non-compete violations are not covered by insurance, they are often used by insurance brokers and have led to significant disputes, including a recent blatant dispute over Marsh LLC's employment of 44 former Aon PLC employees in Florida.
In issuing the executive order called on President Biden FTC to exercise its "regulatory authority to curb the unfair use of non-compete clauses and other clauses
The issue attracted much attention in a widely publicized case in 201
In a trend that is about five years old, several states, including California, have banned competitors in all or almost all situations, while others have introduced more limited bans that can focus on low-wage workers.
For example, Maryland's 2019 non-compete laws prohibit employers from requiring employees earning $ 15 per hour or less, or $ 32,000 per year, to sign such agreements.
Although observers generally expect most action on the issue to remain at the state level, there has also been federal legislation supported by both Democrats and Republicans. The bills include H.R. 1367, Workforce Mobility Act of 2021.
The regulatory process prevents immediate action and it is unclear what the FTC will do in the end, experts say.
"The only solid takeaway" from the executive order is that there is a path to "lower and lower tolerance for non-competitors," says Linda M. Jackson, a partner with Arent Fox LLP in Washington and co-leader of her trade secrets , non-competitive and group of employees.
"I really do not see that they are making any kind of wholesale change that is so dramatic that it would face extreme opposition" in the courts, because "it will probably lead to disputes that would just tie it up anyway," said Donald W Schroeder, a partner of Foley & Lardner LLP in Boston.
The FTC is likely to eventually issue a rule that will impose certain limits on non-competitors, but not earlier than next year, he said. "Most often it will be run at the state level," he said.
Eric W. Weibust, a partner with Seyfarth Shaw LLP in Boston, said the agency will likely follow the state trend toward limiting the enforceability of non-competitors to low-wage workers, rather than issuing a broader ban.
If insurance brokers restrict non-compete agreements to appropriate staff, "I do not see a long-term effect on them," he said.
Few people will worry about well-paid executives "having to sit in the market for a while and count their money", but limiting minimum wage earners "is absurd" and an area of concern, says Thomas E. Wallerstein, a partner with Venable LLP in San Francisco.
"My biggest concern is whether they will find the right dividing line" between those who are and are not subject to non-competition, says Jeffrey A. Mullins, a partner with Taft Stettinius & Hollister in Dayton, Ohio.  Employers who require non-competitors should "only be aware of the increased sensitivity" to their use and the "narrow circumstances in which courts enforce them," says Elizabeth S. Wylie, a partner with Snell & Wilmer LLP in Denver.
Experts recommend companies review their non-competitors to make sure they comply with their local regulations. "Keep track of state laws because they move much faster," than at the federal level, Weibust said.
Employers should consider whether their non-contests are "fully defensible," Jackson said, adding that non-bidding agreements "can be designed in such a way that they can be almost as effective as non-contestants."