What you need to know:
- President Biden’s Federal Trade Commission (FTC) has proposed to ban ALL non-compete contracts (except those in connection with the sale of a business) as an “unfair method of competition” under Sec. 5 of the FTC Act.
- Non-compete agreements ban current and former employees from competing with an employer for a specific time after their employment ends. Such agreements are generally limited in time and geographic scope.
- This is an audacious power grab even by Biden administration standards. It would wipe out 47 state laws and 30 million contracts on the whim of three left-wing bureaucrats.
While you may never be asked to sign a non-compete agreement, you should oppose this arrogation of power by three unelected leftist bureaucrats. If they get away with this, it is difficult to conceive any limits on their power to regulate the U.S. economy. (More can be found under the take action form below)
What you can do:
The FTC is accepting comments until April 19. Sign on to FreedomWorks’ official Comment to the FTC. It’s a simple, effective way to show the FTC that you do not support the proposed ban on non-compete clauses in employment agreements!
First, every state already regulates non-compete agreements: 47 states allow them with limits on how long they can be in effect, the geographic area they can cover, and whether they can be used with low-wage workers. (Three states ban them entirely.) The FTC’s proposal would wipe out all state laws that permit non-compete agreements.
Second, it is far from clear that Sec. 5 of the FTC Act gives the FTC the power to make rules prescribing “unfair methods of competition.” Rather, the FTC’s authority is intended to be used on a case-by-case basis. It is telling that the FTC has never brought a single case alleging that non-compete agreements are an “unfair method of competition.” This move is better understood as a power grab by FTC Chairman Lina Khan and her fellow leftist commissioners.
Employers use non-compete agreements to protect their investments in (1) their employees and (2) their businesses. Employers spend money to train their employees. Employees have access to business practices, including trade secrets, and to client lists that would provide a new employer an unfair competitive advantage and reduce the value of the incumbent employer’s investment in building their business.
The FTC’s claimed benefits of the rule? Just over a two percent wage increase for hourly workers and more than nine percent increase for CEOs. And that’s the best case scenario. The downside? The FTC admits that its proposed rule would reduce capital investment, worker training, and even job growth–and perhaps cause prices to increase. (The FTC is “unsure” about the effect on price.)