As noted in our post, Ask 70 Trade Secret Lawyers and Paralegals about Noncompetes and Get One Opinion, the FTC and DOJ encouraged the submission of public comments following the “Making Competition Work: Promoting Competition in Labor Markets” workshop (the “December 2021 Workshop”).
No surprise, we were not the only ones to submit comments.
In total, there were 27 submissions.
The comments were all over the map, from supporting a complete ban on noncompetes, to opposing FTC intervention, and addressing many of the issues raised during the December 2021 Workshop, including, for example, regulation of no-poach agreements, nondisclosure agreements, and training repayment agreements.
Of note, the U.S. Chamber of Commerce submitted comments that supplemented a comments it filed in September. In its supplemental submission, the Chamber cites AMG Capital Management v. FTC, 141 S. Ct. 1341 (2021) (for the proposition that “the Supreme Court unanimously rejected the FTC’s claim that it could assert broad remedial powers without an express grant of authority from Congress”) and explains that the FTC does not have power to regulate in this area. The Chamber goes on to urge that, authority aside, the FTC should, for a variety of reasons (detailed in the two submissions), leave the regulation of noncompetes to the states.
The Chamber’s earlier submission (from September) was posted in response to an invitation for public comments “on contract terms that may be harmful to fair competition,” posted by the FTC on August 5, 2021 (FTC-2021-0036).
More specifically, the FTC posted the following:
The Federal Trade Commission is inviting public comments on contract terms that may be harmful to fair competition. The Commission has heard from the public about a wide range of terms that may create power asymmetries that disadvantage small businesses, workers, and/or consumers. Concerns have been raised about exclusivity provisions that require small businesses to limit their trade to a single company, non-compete clauses that prevent workers from seeking employment with other firms, and other one- sided contract terms that may exacerbate or lock in power disparities. The Commission encourages members of the public to comment on any issues or concerns they believe are relevant or appropriate to the Commission’s consideration and to submit written data, views, facts, and arguments addressing the topic. The Commission previously solicited input on the topic in 2018 and 2020. Public petitions to prohibit two specific contract terms have also been included for reference (see Petition for Rulemaking to Prohibit Worker Non-Compete Clauses and Petition for Rulemaking to Prohibit Exclusionary Clauses), but additional examples are welcome.
In response to that invitation, the FTC apparently received 2,421 comments, of which 280 have been made available.
One of the 280 was submitted on October 4, 2021, by the Consumer Bankers Association (“CBA”), “the only national financial trade group focused exclusively on retail banking and personal financial services—banking services geared toward consumers and small businesses.”
In its letter, CBA “urg[ed] the FTC to acknowledge the many circumstances, including circumstances related to protection of trade secrets, offering of unique employee services, and employer investment in specialized training, where the use of non-compete clauses are appropriate and to refrain from advancing any overbroad policies that would ban the use of non-competes or unreasonably limit the use of non-competes that serve a legitimate business purpose.” CBA makes the observation that rule making by the FTC that cuts too restrictively on noncompetes “would serve as an unprecedented rejection of the laws of the vast majority of states that have determined that there are appropriate use cases for non-competes.”
The issues are obviously varied and quite complex, and the comments quite diverse.
Stay tuned as things shake out. We’ll keep you updated.
*A huge thank you to Erika Hahn for all of her extraordinary help in monitoring all of the filings.