Executive Order seeks to restrict use of non-compete agreements

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If you signed a non-compete agreement when you were hired, or if you require your employees to sign them, changes regarding their use may be coming.

Pest control companies may use non-compete agreements, which restrict where and when an employee can work after employment with the company ends, to preserve customer contact lists or protect proprietary information.

President Joe Biden signed an Executive Order in July that includes a request for the Federal Trade Commission (FTC) to ban or limit their use. An Executive Order is issued by the President of the United States and has as much power as federal law in certain circumstances. Congress may propose and pass new laws to override an Executive Order; however, they may be vetoed by the president.

The 72 initiatives included in Biden’s Executive Order are designed to “promote competition in the American economy.” The White House, NPR reports, claims non-compete agreements “drive down wages” by making it difficult for workers to land better jobs with higher pay.

NPMA’S STANCE

“The Executive Order tasks agencies with significant regulatory actions, which may take months or years to finalize, leaving the industry time to determine the best course of action,” says Ashley Amidon, CAE, VP of Public Policy for the National Pest Management Association (NPMA). “The NPMA is committed to speaking with many members of the industry on  two aspects of the Executive Order — non-compete agreements and licensing — to ensure our industry’s perspective is reflected in our comments.”

The NPMA started a discussion about non-compete agreements with its Public Policy Committee, and will continue monitoring developments related to the Executive Order, she says.

“Non-compete agreements are widely used in the industry, and vary widely based on location, salary level, and job function,” Amidon says. “The NPMA is gathering insights from the industry about these nuances in order to better inform policymakers when comments are requested.”

Several states have enacted legislation that limits the restrictions an employer can place on an employee. Three states — California, North Dakota and Oklahoma — ban the use of non-compete agreements related to employment. Many other states curtail their use for workers with low-paying jobs, according to a report in the July 12 edition of The National Law Review that addresses the Executive Order’s inclusion of non-compete agreements.

For instance, in Washington, D.C., a law will go into effect later this year that prohibits employers from restricting an employee’s “ability to engage in outside employment or other work-related activities during or after the employee’s employment — even if such outside employment or activities would be competitive with the employer’s business.” The law states employers cannot “include language in their policies, offer letters, or employment agreements” that would “prohibit employees from moonlighting or other otherwise engaging in any outside work during or after employment.”

Legislation passed in Maryland, Massachusetts and Washington “significantly” limits the use of non-compete agreements related to employment, according to The National Law Review. In addition, laws in Illinois, Maine, Maryland, Massachusetts, New Hampshire, Oregon, Rhode Island, Virginia and Washington restrict the use of non-compete agreement for employees with low-paying jobs.

CHECK YOU CONTRACTS

Employers need to make sure the non-compete agreements they have in place and require employees to sign comply with the regulations enacted in their states.

Because Biden’s Executive Order calls on a ban of non-compete agreements, The National Law Review said employers should “consider strengthening workplace policies that address confidentiality, non-solicitation, and non-interference to protect trade secrets and proprietary information in the event the use of non-compete agreements is limited in whole or in part by the FTC.”

Businesses are expected to push back against an all-out ban of non-compete agreements, NPR reports. For instance, they may continue to be required for well-paid workers whose jobs involve proprietary information, but not low-paid workers with jobs that do not.