The legal and mainstream media is still abuzz following the Federal Trade Commission’s Jan. 5, 2023, Notice of Proposed Rulemaking that would ban all employee non-compete agreements nationwide. And earlier this month, a bipartisan Senate bill was introduced (the Workforce Mobility Act of 2023, sponsored by U.S. Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.)) that also would ban non-competes across the board (except, as in the FTC’s proposal, in connection with the sale of a business). But comments made by President Biden in his Feb. 7 State of the Union Address signal that a more measured approach focused on banning non-competes for low-wage workers may ultimately be what becomes law.
Specifics from President Biden’s address
Although President Biden did not discuss the specifics of either the FTC proposal or the Senate bill in his address, his statements concerning the proposed non-compete ban gave as an example “a cashier at a burger place” who “can’t walk across town and take the same job at another burger place to make a few bucks more.” Said President Biden, “We’re banning those agreements so companies have to compete for workers and pay them what they’re worth.” These statements fall right in line with prior statements by the Biden administration and by Biden when he was campaigning for office that narrowly hone in on non-competes for low-wage workers, especially in the fast-food industry.
President Biden’s statements provide further indication that the true goal of the FTC’s proposed rule is likely to target non-competes for low-wage workers and the blanket ban, as one commentator has described it, is simply the FTC “swinging for the fences.” It is unclear what changes will be made to the FTC’s proposed rule following the comment period, which currently runs through March 20 and may be extended another 60 days. But, the FTC’s Notice of Proposed Rulemaking does offer several alternatives to a blanket ban, including a rule that differentiates based on a worker’s income and other factors.
What’s next for non-compete legislation
To be sure, the writing is on the wall that non-competes for low-wage workers will eventually be outlawed on the federal level (many states already outlaw them) either through agency or legislative action. But, it is not yet time to panic when it comes to non-competes for mid to high-level employees that can be tied to the employer’s legitimate interests, such as protecting trade secrets or customer goodwill. Most states, including Ohio, allow such non-competes with some limitations and exceptions. It will be a long and hard-fought battle in the federal legislature and the courts before a blanket ban could become law. Stay tuned to ELR for further updates.