The Future of Noncompetition Provisions in a Trump Administration

Key Takeaways:

• President-elect Donald Trump did not make noncompetition provisions a centerpiece of his campaign or message to voters, and a second Trump presidency presents a mixed bag of inputs for predicting the fate of noncompetition provisions during his time in office.
• Trump is no stranger to noncompetition provisions, having used them with campaign staffers during his first presidential campaign and personally before he entered politics.
• Looking forward, major changes to the restrictive covenant landscape over the next four years seem much more likely to come from the states or even cities around the country rather than from the White House.

The politics of noncompetition provisions are a point of uncommon unity in what is otherwise an often polarized climate. Traditionally "red" states (i.e., Oklahoma and North Dakota) and traditionally "blue" states (i.e., California and Minnesota) all have bans against these covenants. Roughly a dozen other states across the political spectrum have implemented wage-based or other restrictions on the use of noncompetition provisions during the past two presidencies. Now, with the country looking toward a second Trump presidency, the question for employers and employees is whether these provisions, which have seen significant threats and challenges over the past few years, will find a champion or antagonist in the White House. Notably, despite the importance of the economy in this election, neither candidate made noncompetition agreements a central focus of their message to voters. As a result, we will look to other sources of information for understanding how the incoming Trump administration may approach this issue.

A second Trump presidency presents a mixed bag of inputs for predicting the fate of noncompetition provisions. Most notably, although it could easily be a case of "do as I say, not as I do," Trump's first presidential campaign was known to use noncompetition provisions for campaign staffers, which restricted their ability to compete against Trump's candidacy until it had resolved - either by the conclusion of the "US presidential election cycle" or "the date Mr. Trump announces that he will not run or will no longer run for the Presidency of the United States . . . ." Further, before he officially entered politics, Trump personally agreed to a "six state non-compete" as part of a deal resolving a Chapter 11 bankruptcy proceeding. Taken together, although certainly not dispositive, these two uses of noncompetition agreements by Trump suggest that he sees value in these contractual business provisions.

Conversely, Trump's vice presential running mate, JD Vance, has spoken favorably about FTC Commissioner Lina Khan, who is the architect of the FTC's proposed ban on noncompetition provisions. Vance's alignment with Kahn is most notable in the technology space, but he has not specifically identified the FTC's ban on noncompetition provisions as a topic on which he does, or does not, agree with Khan. However, Rep. Matt Gaetz of Florida, who at times acted as a surrogate for Trump and his policies, has made his own support for the FTC's noncompetition ban clear.

Finally, during the past four years, various federal agencies in addition to the Federal Trade Commission - such as the Federal Deposit Insurance Corporation and the National Labor Relations Board - have sought to limit or ban the use of noncompetition provisions and other related covenants. The strength of these agencies as well as their mandate over the next four years remain to be seen.

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Ultimately, the fate of noncompetition provisions is far from settled. Although Trump is fully familiar with these traditional business provisions, major changes to the restrictive covenant landscape seem much more likely to come from the states or even cities around the country, rather than from presidential decree.