On July 9, 2021, President Biden issued an executive order in which, among other things, he requested that the Federal Trade Commission adopt administrative rules which would ban or limit the use of non-competition agreements in employment contracts.

If this occurs, it would be the first time there was any federal regulation of non-competes.  This area of law has traditionally been within the purview of the states and professions.  There would undoubtedly be legal challenges to any such federal action.

There is currently a very diverse approach to non-competes from state to state.

California, North Dakota, and Oklahoma already have legislation which bans non-competes in employment contracts.  The rationale for California’s law was that by promoting the free movement of employees, especially in the high tech sector, ideas would be freely shared and innovation would be encouraged.

Massachusetts has legislation which restricts the use of non-competes, and prohibits their use for medical professionals, social workers, broadcasters, and lawyers.  Other states, including Rhode Island, Maine and New Hampshire have enacted legislation which restricts the use of non-competes.

New York follows a traditional common law approach, in which non-competes are regulated by court decisions.  In New York a non-compete must generally be designed to protect the legitimate business interests of the employer, and not unreasonably interfere with the employee’s ability to earn a living.  Non-competes in New York are generally enforceable against high level employees.

The American Medical Association has issued an Ethics Opinion limiting the use of non-competes in physician contracts.  In New York, an attorney can ethically be subject to a non-compete only if it is part of an agreement made when the attorney retires from the practice of law.