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Presidential Executive Order Requests Big Changes for Labor Market

July 9, 2021
employees

President Joe Biden signed a sweeping executive order Friday aimed at promoting competition in the labor market. The order establishes 72 initiatives and calls to action over a dozen federal agencies to combat what Biden calls the most pressing competition problems in the United States economy. Biden’s order, which also contains guidelines for healthcare, big tech and transportation, focuses on policymaking he believes will create a strong, unrestricted labor market. The executive order heavily directs the Federal Trade Commission (FTC) and Department of Justice (DOJ) to implement his plan, explicitly requesting reduced non-compete agreements, narrowed occupational licensing requirements and an emphasis on enforcing antitrust laws.

Departure From the Standard Non-Compete Agreement

Biden’s first request calls on the FTC and encourages a ban or limit on the unnecessary use of non-compete agreements. According to White House research, it is believed roughly half of all private sector businesses require non-compete agreements, with nearly one-third of those businesses requiring a non-compete regardless of the employee’s duties. Under such practice, anyone from the CEO to a maintenance worker is prohibited from considering other employment options without some restriction. Biden argues such limitations are unnecessary to many Americans in the labor market and the continuation of such practices will only protect employers at the cost of hindering the economy. Biden has previously voiced similar petitions for change with a focus on blue-collar and hourly workers rather than high-paying officers and employees privy to trade secrets, but any official changes will be contained in regulations to be promulgated by the FTC.

Consistency in Occupational Licensing Regulations

Biden again calls on the FTC to restrict occupational licensing requirements to promote free movement in the labor market across the country. Although occupational licensing is imperative to the protection of Americans, such as licensing of your doctor or attorney, the increase in required licensing has soared in recent years. Today, almost 30% of jobs require some licensing – up from 5% in the 1950s. The Occupational Licensing Report released by the Department of Labor in 2015 estimates that over 1,100 different occupations are regulated on a State-by-State level, yet there are as low as 60 occupations that are regulated by all 50 states. For example, Florida is the only state in the country that requires its florists receive licenses, while only nine states require licensing for funeral home personnel. Given the irregularities, Biden argues the inconsistencies and number of regulations impede workforce mobility and limit competition on a national level. Under the current guidelines, licensed professionals may not contemplate employment out of state because they are required to be re-licensed, costing time and money. Similar problems may be seen by employers as well, with licensing discrepancies limiting available job candidates and potentially adding costs to cover new training and licensing. While not every person may need to move state-to-state, the inconsistencies can be burdensome to those that do, with Biden explicitly calling attention to the effect on military families. Because nearly all occupational regulations are decided on the state level, it is uncertain how the FTC will be able to make substantial changes by its rulemaking, as suggested by the order.

Stronger Antitrust Regulation in the Fight for Higher Wages

Biden’s final labor market requests advocate for the FTC and DOJ to vigorously enforce antitrust laws to give specialized workers the opportunity for more competition. Biden first points to the need to curtail monopolies, focusing closely on mergers, currently pending and previously approved, to ensure those mergers do not have a negative impact upon the labor market. Biden contends that reduced competition in business, paired with unnecessary non-compete agreements, limits the options workers have when considering new opportunities or requesting higher wages, predominantly in specialized fields. As specialized trades and industries continue to flourish, increased mergers and monopolies equate to fewer businesses employees can work for. This concept pairs closely with Biden’s second request to the agencies to issue new guidance to limit employers from sharing information on employee wages, as he believes it may be being used to suppress wages and benefits. Biden contends existing guidance provided by the DOJ and FTC allows third-party providers to collect and make wage data available to employers, but not to employees. In some circumstances, this can occur without triggering antitrust issues and it is believed by the administration that it can also be used to allow employers to collaborate and suppress wages. Biden urges the DOJ and FTC to reconsider the guidelines with an eye toward possible misuse and to respond appropriately to ensure exploitation of the current guidelines cannot occur.

Long-Term Success and the Future of the Labor Market

While Biden has high hopes for the order, its long-term impact will be dependent on the regulatory agencies. Given that Biden cannot implement the order himself, he must leave the policymaking to his agencies, such as the FTC and DOJ. Their action in response to the order will face scrutiny and challenges – likely from the largest businesses Biden’s order attempts to restrict. Non-compete agreements and occupational licensing have been a standard practice left to the states and individual businesses to manage. As federal agencies attempt to take control of these practices, one can assume there will be resistance from the affected parties. Knowing what is ahead, the agencies will not only have to carry out the order but also ensure any regulations created can withstand legal challenges to them. If you have questions about this executive order or the implications for you or your business, please reach out to Rob Gilmore (rsg@kjk.com; 216.736.7240) or Alan Rauss (amr@kjk.com; 216.736.7221), or contact any of our Labor & Employment attorneys.

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