Earlier this year, the White House and Treasury issued reports criticizing the widespread use of non-compete agreements. They found that such agreements affect nearly one in five U.S. workers, or approximately 30 million people.

Last week the White House expanded its efforts, issuing a Call to Action for states to reform and limit non-compete agreements, if not ban them more generally as has been done in California, Oklahoma and North Dakota. The White House proclaimed that “non-compete agreements should be the exception rather than the rule, and . . . there is gross overuse of non-compete clauses today.” According to the published Call to Action, “[r]esearchers have found that states that strictly enforce non-compete agreements have lower wage growth and lower mobility than states that do not enforce them.”

The White House is urging states that continue to honor non-competes to consider the following restrictions:

  1. Ban non-compete clauses for particular categories of workers, such as workers under a certain wage threshold, workers in certain occupations, and workers who are laid off or terminated without cause;
  2. Improve transparency and fairness of non-compete agreements by, for example, requiring greater disclosure or disallowing non-competes unless they are proposed before a job offer or a significant promotion has been accepted; and
  3. Incentivize employers to write enforceable contracts, and encourage the elimination of unenforceable provisions by, for example, rendering unenforceable in their entirety agreements that contain unenforceable non-compete provisions.

As the Call to Action notes, “only in rare cases is a non-compete the best option for an employer to use, over and above the host of other legal frameworks – including trade secrets protections, non-solicitation agreements, and non-disclosure agreements. As states move to ensure free labor market competition, non-compete reform should be considered as one important tool.”