It is official! … Well, almost official — it will be official tomorrow.
The FTC filed its Notice of Proposed Rule Making with the Federal Register today (January 18).
The Federal Register will publish it tomorrow.
And then the 60-day clock to submit comments will start to run.
Assuming no extensions, the deadline for comments will now be March 20, 2023.
In the meantime, the FTC has created a website on Regulations.gov. As of a few minutes ago, the FTC had received 5,822 comment, of which 3,957 were posted.
As would be expected, perspective matters.
Many people who have been bound by a noncompete find them abusive. (And, many actually are.)
But, not all are. And a different, often-unheard, perspective is voiced by some business owners, for whom noncompetes are a critical tool in protecting their businesses, many of which are small, family-owned businesses.
We have not reviewed many of the thousands of comments, but we thought the two below were particularly instructive.
The first was this:
I am the founder, president and CEO of Special D Events, a national meeting/event management company. My 30-year old multi-million dollar professional service business could be forced to close its doors if the government bans non-compete agreements. Without these agreements, companies will hire agencies like ours and “test” out workers who are placed on their account. If they like their work, the companies will simply hire these workers directly. We will have onboarded, trained and mentored them for nothing. We are not an employment agency.
That sentiment is echoed in another we saw:
Hello – My name is Brad Halley and I own USAVinyl, LLC. We use Non-Competes in areas where we pay a lot of money to educate and train employees on extrusion. This is a large cost and benefit for our team members. But, I do not want to spend the monies in training and then the person leaves to my competitor and they benefit from my capital. So, non-competes are crucial to my business and should not be terminated. But, the non-competes need to be reasonable, so we allow them to go to other companies that do the same thing, but in different industries. Thanks – Brad Halley
It is important that the FTC hear all perspectives — pro and con. Different perspectives shed light on the intricacies of the issue, the impact that the absence of noncompetes will have on companies and the employees who remain there, the need for balance, and where the right balance might be achieved.
We saw precisely that type of information develop here in Massachusetts during the decade-long process working on legislation that ultimately became law in 2018. And we saw it again in connection with President Obama’s working group that ultimately resulted in the Call to Action on Noncompetes, proposing fairness and transparency recommendations for the states.
As I have mentioned before (and as I have done in the past (see here and here), I am working on a letter to the FTC to provide important, experience-based, practical information from me and dozens of other lawyers and paralegals around the country. We hope that the FTC will take the information into consideration as it determines how to proceed.
But, please note: We will not be advocating for a position.
As before, we will provide information. We will explain the pros and cons of noncompetes, debunk the many misunderstandings that continue to pervade the process, identify the risks of proceeding with a ban, and provide an outline of what a balanced approach might look like (assuming the FTC determines that it has authority to do move forward with a rule).
If you are a lawyer or paralegal who is interested in providing comments and signing onto our letter (subject, of course, to your review and agreement with the final draft), please email my paralegal, Erika Hahn, and email me at your earliest convenience, and we will loop you into the process. In the alternative, if you wish to comment on your own (whatever your perspective), now would be the time.
*Huge thank you to Hannah Joseph and Erika Hahn for spotting this for me!