Back in 2015 there was a lot of publicity about a non-compete Jimmy John’s was implementing for its sandwich makers. Here is what I said back then:
“When news of the Jimmy John’s non-compete came out last October my concern was the impact it would have on businesses with legitimate non-competes. There is always a populist theme that is anti-non-compete. Employees should be able to come and go as they please and a non-compete agreement prevents that. “Bad” non-competes undermine “good” non-competes. There are situations where non-competes make sense and there is an interest worthy of protection. But when bad non-competes are in play and receive attention, the discussion of why we have non-competes in the first place follows.”
Non-competes are low hanging fruit for politicians but they rarely receive Presidential attention and are generally challenged on a state level. Last week the President delivered a wide ranging executive order that addressed among other things non-compete agreements. The press release/fact sheet for the order said the following (my translation in part):
- Many Americans workers have non-competes;
- Non-competes make it harder for workers to move to higher paying jobs;
- The President would like to ban or limit non-competes; and
- The Executive Order “Encourages the FTC to ban or limit non-compete agreements.”
The actual order states:
To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.
We’ve got a long way to go before this gets anywhere. First, of all there is a very real question of what restrictions the FTC can implement to restrict non-competes. I can tell you here in Texas we have an attorney general that challenges any federal action that infringes on state’s rights and I doubt FTC restrictions that impact the Texas Non-Compete Statue will go unchallenged. Second, the actual language recognizes that non-competes may be appropriate in certain situations – there isn’t going to be a ban. Finally, even if there was a ban there remains other items in an employer’s arsenal to use including: (1) non-solicitation provisions; (2) non-disclosure provisions; and (3) notice/garden leave policies.
There was a lot of pomp and circumstance about the order but that end of the day, the death of the non-compete is not coming anytime soon.
