Federal Ban on Non-Comps?

President Biden has announced that he will work with Congress to “eliminate all noncompete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets.”  In late February, Senators and Representatives introduced a bill to ban all non-comps except in acquisitions and partnership dissolutions.

Business people are well aware of the historical debate over non-comps, which have slowly fallen out of favor in some jurisdictions (including a near-ban in California and a sharp retrenchment in Massachusetts).  Without repeating all the arguments, what can we expect to see in the future?  Below, some speculations:

Big tech often has spoken about its need to protect the technology that made it big, a large employer and the bringer of modern science to the economy and to the entire population.  Big tech is under attack today from many quarters in many countries, not only in the US.  Will this mind-set also weaken the appeal of the big tech argument about needing non-comps?

If the American economy continues to move away from manufacture, would this trend place pressure on fostering start-ups which will replace other lost opportunities?  Will this broad societal trend lend support to a general perception that non-comps stifle start-ups which are the wave of the US’s future?

To the extent that non-comps become legally disfavored, enforcement of perceived rights of former employers will move to efforts to protect competitive advantage through enforcement of trade secret rights; we see this trend already under the Federal Defend Trade Secrets Act, which is premised on the almost unassailable legitimacy of claims of ownership rights by the businesses that invent a technology or process.  These are sometimes difficult cases, however; high requirements of proof, often involving technical matters of some subtlety.  Full-time employment for litigation attorneys?

Finally, there is substantive debate as to whether non-comps, on a net economic basis, actually do harm workers who sign them, rather than help them.  There are current claims, for example, that research shows that eliminating non-comps causes reduced employee compensation and satisfaction (putting aside impact on companies and innovation).

We put aside the logic of having the Federal Government act on this range of issues.  That is a wholly different debate.


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