Workers of all stripes—from brewers to chefs to fast-food employees—are subject to non-compete agreements, which can restrict their ability to find new jobs or start their own businesses.
The Biden administration is cracking down on non-compete clauses—a common hiring mechanism that can restrict workers’ ability to find new jobs or start their own businesses.
On Friday, the President signed an executive order calling on the Federal Trade Commission (FTC), the agency that oversees consumer protection and antitrust, to “ban or limit” the use of these stipulations in employment contracts. The order was part of a broader initiative meant to promote competition in the U.S. economy, which also included funding to reduce concentration in the food supply chain among other aims.
“Competition in labor markets empowers workers to demand higher wages and greater dignity and respect in the workplace,” the White House wrote in a press release. “One way companies stifle competition is with non-compete clauses.”
This development could have particularly big ramifications in the restaurant industry, where non-compete restrictions have been imposed on workers in various capacities—from brewers to chefs to fast-food employees—in the past few years. While the prevalence of the practice may vary by region, one labor study published in April estimated that around one in six people working in food preparation or service jobs was bound by a non-compete agreement, according to a survey of nearly 67,000 workers.
“You would have to either leave the area or sit out the market for whatever the period of your non-compete is and then re-enter.”
Non-compete provisions typically prevent employees from leaving a job to work for a competitor or start a competing business within a certain region or time frame. Some businesses say that they depend on non-compete agreements as a form of protection for proprietary information, but they can also limit workers’ options when looking for future work, particularly in low-wage industries like food service and hospitality.
“If you work at a restaurant, and you have a noncompete, and you want to get hired by another restaurant down the street, or you want to start a restaurant, this non-compete would prevent you from doing this immediately,” said Evan Starr, an associate professor at the University of Maryland’s business school and author of the April study. “You would have to either leave the area or sit out the market for whatever the period of your non-compete is and then re-enter. The key idea is that it’s going to [get] workers to stay longer, stunt their mobility, prohibit them from taking better jobs in their chosen field, and reduce entrepreneurship.”
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