Lame-Duck Threat to Non-Competes

By John Alan Doran

Not content to leave employers alone for the last few months of this term, the Administration wants to discourage, nationwide, the use of contract provisions that limit individuals from competing with their former employers, and even to ban such agreements in many instances. See the White House’s Call to Action. Of course, as a general proposition, non-competes are governed by state law, so the Administration is butting in where it really doesn’t belong. Nonetheless, the Administration instructed the DOL to examine non-competes to root out any supposed market collusion by employers in violation of antitrust law. The Administration also called on states to ban non-competes for lower-wage jobs, to prohibit enforcement of non-competes when an employee is laid off, and to prohibit any non-compete created after an employee has accepted a job offer.

While this remains an issue reserved for the states, the Administration’s announcement augurs for a very different conclusion down the road. The Administration repeatedly suggested that non-competes hinder the free movement of labor in the marketplace. By sowing this notion of the effects of non-competes on commerce, is the Administration setting the stage to assert that Congress can (and should) step in and regulate non-competes nationally under the Commerce Clause? Congress recently moved to increase trade secret protection – also a traditional issue for state law. Stay tuned.