President’s Executive Order Takes On Noncompetes, Employee Licensing

Employment Law

President Joseph Biden has signed an Executive Order (EO) aimed at promoting competition in the U.S. economy that could have serious ramifications for employers.

Corporate consolidation has been accelerating across U.S. industries, and the lack of competition has driven up prices for consumers and driven down wages for workers, the White House explained in a fact sheet accompanying the EO.

In response, the EO launched a “whole-of-government effort” to promote competition, featuring a total of 72 initiatives by more than a dozen federal agencies.

Most notably for employers: a directive to the Federal Trade Commission (FTC) that encourages the agency to ban or limit non-compete agreements; ban “unnecessary occupational licensing restrictions that impede economic mobility”; and, together with the Department of Justice (DOJ), strengthen antitrust guidance “to prevent employers from collaborating to suppress wages or reduce benefits by sharing wage and benefit information with one another.”

Roughly half of private sector businesses—including those in the construction and retail industries—require at least some employees to enter non-compete agreements, according to the fact sheet, affecting 36 million to 60 million workers, while almost 30 percent of jobs in the United States require a license (up from less than 5 percent back in the 1950s).

“Fewer than 5 percent of occupations that require licensing in at least one state are treated consistently across all 50 states,” the White House said. “That locks some people out of jobs, and it makes it harder for people to move between states.”

Workers may also be harmed by existing FTC and DOJ guidance that allows third parties to make wage data available to employers—and not to workers—in certain circumstances and without triggering antitrust scrutiny, the White House noted. “This may be used to collaborate to suppress wages and benefits.”

Biden’s suggestions for the FTC complement the President’s support for the Protecting the Right to Organize Act, according to the White House, “to ensure workers have a free and fair choice to join a union and to collectively bargain. Unions are critical to empowering workers to bargain with their employers for better jobs and to creating an economy that works for everyone.”

The EO also established a White House Competition Council, led by the director of the National Economic Council, tasked with monitoring progress on the initiatives and “coordinat[ing] the federal government’s response to the rising power of large corporations in the economy.”

To read the Executive Order, click here.

To read the fact sheet, click here.

Why it matters: Although touted by the White House as an effort to make “it easier to change jobs and help raise wages by banning or limiting non-compete agreements and unnecessary, cumbersome occupational licensing requirements that impede economic mobility,” the EO did not take definitive action on non-competes or licensing. However, the EO does put employers on notice regarding the current administration’s priorities and provides a road map for federal agencies to take action on the issues identified.



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