The Biden Administration began 2023 by announcing two new policies to enhance worker protections. On January 5, the Federal Trade Commission (FTC) proposed a new rule that would prevent all employers from imposing non-compete agreements on their employees. Five days later, on January 10, the Office of Management and Budget (OMB) and the Department of Labor (DOL) issued a joint memo directing the largest federal agencies to designate labor advisors to work with agency staff to ensure federal contractors are aware of and comply with labor laws, rules, and regulations. Both policies would not only grant new protections to millions of workers, civilian and federal alike, but could increase worker pay and reduce violations of federal wage and safety laws.
The FTC’s proposed rule would ban all employers from including non-compete provisions in employment contracts. Non-compete provisions, generally contained in employee onboarding agreements or severance agreements, impede an employee’s job mobility by limiting where they can work once they leave an employer. While many states restrain the use of non-compete clauses, and a handful hold them mostly unenforceable, the use of non-compete clauses remains widespread in the United States, directly affecting 20% to 45% of workers in jobs as disparate as doctors, software engineers, hairstylists, and even interns. As FTC Chair Lina M. Khan stated, “Non-competes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”
Beyond increasing competition, prohibiting non-compete clauses could increase wages by almost $300 billion a year across the United States and decrease racial and gender wage gaps by 3.6-9.1%, according to the FTC. Studies have found that wages increase when non-compete clauses are limited: Hawaii tech workers saw wages rise 4% after the state banned their non-competes, and the wages of Oregon’s hourly workers increased by 2-3% after the state banned non-competes for low wage workers in 2008. Despite these state laws, many workers remain unaware of these protections and needlessly turn down job offers as a result. As a response, the FTC’s proposed rule requires employers to rescind existing non-compete agreements and actively inform workers that they are no longer in effect.
The FTC is soliciting comments from the public on the proposed rule until March 10, 2023. The agency will then move to publish a final version of the rule, which will take effect 180 days after publication.
Shortly after the FTC announced its proposed rule, the OMB and DOL issued guidance that would improve compliance with federal labor law for 5 million employees who work for federal government contractors. The guidance directs twenty-four of the largest federal agencies to designate labor advisors to ensure that their federal contractors are aware of labor law requirements and to prevent and remedy violations. The advisors will provide advice on compliance with wage laws, nondiscrimination and affirmative action requirements, workplace safety, and non-interference with worker organizing efforts, among other laws and regulations. The Joint Memo also establishes an interagency working group to improve communication and training standards.
Despite strong employee protections and highly developed federal contracting law, in 2020 the General Accountability Office found that federal contractors frequently violated wage and benefit laws. From 2014 to 2019, federal contractors paid about $224 million in back wages for violating locality wage law requirements. In 2013, a Senate report found that federal contractors accounted for nearly 30% of the top violators of federal wage and safety laws. With the implementation of agency-wide labor advisors, OMB and DOL are taking steps to ensure federal agencies protect the rights of employees of federal contractors.
For more information on D.C.’s new non-compete law, check out our blog post. If you have concerns about your non-compete agreement or your treatment as an employee of a federal contractor, please contact us today.
