The Shifting Legal Landscape of Non-Compete Agreements and Its Impact on Labor Mobility and Business Valuation

The legal landscape governing non-compete agreements has undergone seismic shifts in recent years, with profound implications for labor mobility, corporate strategy, and investment risk. At the heart of this transformation lies the Federal Trade Commission’s (FTC) evolving stance under successive administrations, particularly the Trump-era policies that laid the groundwork for today’s regulatory debates. For investors, understanding these dynamics is critical to navigating sector-specific risks and opportunities.

The Trump-Era Foundation: Pro-Business Priorities and Deregulatory Momentum

From 2017 to 2021, the Trump administration’s FTC adopted a deregulatory approach that prioritized employer interests over worker mobility. A pivotal moment came in 2019 with the Policy Statement on Standard Essential Patents, which reversed Obama-era precedents and affirmed the enforceability of non-compete clauses in patent licensing disputes [1]. This signaled a broader philosophy: non-competes were seen as tools to protect innovation and corporate investments, particularly in industries reliant on intellectual property [6].

While the Trump-era FTC did not directly regulate non-competes for employees during this period, its actions set the stage for later conflicts. The administration’s antitrust focus leaned toward traditional theories of harm, favoring structural remedies in mergers and avoiding expansive interpretations of Section 5 of the FTC Act [5]. This created a regulatory environment where non-compete enforcement was largely left to state courts, leading to a patchwork of protections that varied widely across jurisdictions.

Quantifying the Impact: Labor Mobility and Wage Suppression

The consequences of this approach were stark. By 2024, estimates suggested that up to 46% of U.S. workers were bound by non-compete agreements, with immigrant workers in tech and healthcare disproportionately affected [3]. These clauses curtailed labor mobility, suppressing wage growth and limiting opportunities for career advancement. A 2023 study of Oregon’s 2008 ban on non-competes for hourly workers found that such restrictions led to a 2%–3% average wage increase, with even larger gains for workers directly bound by the agreements [3].

The Trump-era policies, by contrast, reinforced a status quo that favored employers. Firms in states with strict non-compete enforcement saw a 32.5% reduction in patent value relative to firm assets, suggesting that while non-competes may protect trade secrets, they also stifle innovation by limiting knowledge flows [1]. This duality—protecting corporate assets while hindering human capital development—created a tension that investors must now weigh.

The 2024 FTC Rule: A Paradigm Shift and Its Aftermath

The Biden administration’s 2024 FTC rule, which banned new non-compete agreements for all workers and rendered existing clauses unenforceable for non-senior executives, marked a dramatic reversal [2]. While this rule did not take effect during the Trump era, its roots can be traced to the regulatory uncertainty created by shifting enforcement priorities. The Trump-Vance administration’s 2025 formation of a Joint Labor Task Force to investigate non-competes further underscored the policy’s contentious nature, blending deregulatory rhetoric with a renewed focus on worker protections [1].

For investors, the implications are multifaceted. Sectors reliant on high-skilled labor—such as technology, biotech, and professional services—face heightened risks as firms adjust to a more fluid labor market. Companies that previously used non-competes to retain talent may now need to invest in alternative retention strategies, such as equity incentives or enhanced career development programs [3]. Conversely, industries with rigid hierarchical structures (e.g., finance, consulting) could see increased competition for top performers, driving up operational costs.

Business Valuation Trends and Sector-Specific Risks

The regulatory shifts have also reshaped business valuation models. From 2017 to 2021, the Trump administration’s pro-business policies—including the 2017 Tax Cuts and Jobs Act—boosted corporate valuations by reducing compliance burdens and encouraging mergers [4]. However, the lack of a cohesive non-compete strategy introduced volatility. For instance, firms in states with strict non-compete enforcement saw reduced innovation efficiency, as evidenced by lower patent values [1].

Post-2024, the FTC’s rule has created a new calculus. While increased labor mobility could spur innovation and productivity, it also raises concerns about talent poaching and the erosion of competitive advantages. In healthcare, for example, the uncertainty around non-compete enforcement has already influenced M&A strategies, with buyers factoring in higher due diligence costs to assess workforce stability [5]. Similarly, tech firms are recalibrating their IP strategies, balancing the need to protect trade secrets with the risk of alienating employees in a more mobile market.

Investment Implications: Navigating Regulatory Uncertainty

For investors, the key takeaway is adaptability. The Trump-era policies created a regulatory environment where non-competes were seen as a legitimate business tool, but the Biden-era ban and subsequent enforcement actions have introduced a new layer of complexity. Sectors with high reliance on non-competes—such as franchising and professional services—face elevated risks, while industries with flexible labor models (e.g., gig economy platforms) may benefit from increased mobility.

Moreover, the cyclical nature of regulatory shifts—evident in the Trump-Vance administration’s 2025 task force—highlights the need for scenario planning. Investors should monitor state-level reforms and federal enforcement trends, as these will continue to shape labor costs, innovation pipelines, and competitive dynamics.

Conclusion

The legal landscape of non-compete agreements has evolved from a deregulatory stance under Trump to a more interventionist approach under Biden, with the Trump-Vance administration signaling a nuanced middle ground. For investors, the interplay between labor mobility, business valuation, and regulatory risk demands a granular understanding of sector-specific trends. As the FTC’s role in shaping this landscape continues to evolve, the ability to anticipate and adapt to policy shifts will be a defining factor in long-term investment success.

Source:
[1] Non-Compete Agreements, Innovation Value and Efficiency [https://www.sciencedirect.com/science/article/abs/pii/S0929119924001603]
[2] Non-Compete Clause Rule [https://www.federalregister.gov/documents/2024/05/07/2024-09171/non-compete-clause-rule]
[3] Low-Wage Workers and the Enforceability of Noncompete Agreements [https://www.researchgate.net/publication/350644359_Low-Wage_Workers_and_the_Enforceability_of_Noncompete_Agreements]
[4] The OBBBA's Ripple Effect: What it Means for SALT Policy [https://www.criadv.com/insight/one-big-beautiful-bill-act-salt-policy-changes/]
[5] Global M&A trends in health industries: 2025 mid-year [https://www.pwc.com/gx/en/services/deals/trends/health-industries.html]