Next up at the feds: The FTC holds its next hearing on noncompetes

Happy New Year!

On January 9, 2020, the FTC will be holding a hearing (at 8:30 a.m. at the FTC’s Headquarters Building, 600 Pennsylvania Avenue, NW, Washington, DC) “to examine whether there is a sufficient legal basis and empirical economic support to promulgate a Commission Rule that would restrict the use of non-compete clauses in employer-employee employment contracts.”

The fact that the hearing is framed as a search for a justification for rulemaking to restrict employee noncompetes is a bit troubling, but no surprise. As discussed (at length) in a recent article (Noncompete Misconceptions May Be Inhibiting Reform(available without subscription here)), the FTC is under significant and increasing pressure to act where the states and Congress have not.

The pressure for an end-run around the legislative process is disturbing and seems likely to continue. Worse, it’s based in large part of misinformation, jumped-to conclusions, and position-based advocacy. So, if you want the FTC (and the legislators) to make a properly informed decision (whatever that decision may ultimately be) make sure your voice is heard.

To be clear, I am not advocating for any particular position to be advanced; rather, while I have my own views on the proper place for noncompetes, I am asking only that people provide unbiased information and the FTC (and legislators) make their decisions grounded in real-world impacts and sound policy, not conjecture and disinformation.

With that in mind, here is the FTC’s description of the workshop:

At the workshop, legal scholars, economists, and policy experts will review the current state of the law and economic literature on non-compete clauses in contracts between employers and employees. Academic panels will evaluate the effects of non-compete clauses on labor market participants and their efficiency rationales (if any). The panels also will consider the potential harms to workers that can and should be addressed through the FTC’s rulemaking, law enforcement, or advocacy authority.

Topics for discussion include:

  • What impact do non-compete clauses have on labor market participants?
  • What are the business justifications for non-compete clauses?
  • Is state law insufficient to address harms associated with non-compete clauses?
  • Do employers enforce non-compete agreements contained in standard employment contracts? How routine is such enforcement?
  • Are there situations in which non-compete clauses constitute an unfair method of competition (UMC) or an unfair or deceptive act or practice (UDAP)? How prevalent are these situations?
  • Should the FTC consider using its rulemaking authority to address the potential harms of non-compete clauses, applying either UMC or UDAP principles*? What “gap” in existing state or federal law or regulation might such a rule fill? What should be the scope and terms of such a rule? What is the statutory authority for the Commission to promulgate a rule?
  • Should the FTC consider using other tools besides rulemaking to address the potential harms of non-compete clauses, such as law enforcement, advocacy, or consumer/industry guidance?
  • What additional economic research should be undertaken to evaluate the net effect of non-compete agreements? Should additional economic research on the empirical effects of non-compete agreements focus on a subset of the employee population? If so, which subset?

The FTC also notes that “[i]nterested parties may submit public comments electronically or in paper form on these topics or other related topics through February 10, 2020.” I will be submitting comments, and welcome anyone interested in discussing my comments to contact me by email.

In the meantime, see you on January 9!


*UMC is Unfair Methods of Competition; UDAP is Unfair and Deceptive Acts and Practices.