Lina Khan, Chair of the Federal Trade Commission (FTC), testified at an oversight hearing before the House Judiciary Committee this past Thursday (July 13, 2023). (This was presaged by the kickoff of the investigation back in June.)
Amid the grandstanding and gratuitous comments from some of the Members, Chair Khan was asked a handful of basic questions about the FTC’s Proposed Rule to ban noncompetes. Nothing unexpected or new came out during the testimony.
Live Testimony about the Proposed Noncompete Ban
Here are excerpts of the questions about noncompetes from the four-plus hours of live questioning during the hearing.
Representative Johnson’s questioning about the nature and impact of the proposed ban:
Representative Jayapal’s questioning about why the FTC proposed the ban and who supposedly benefits:
Representative Bush’s questioning, amplifying as fact some of the very dubious findings of the research:
(For more information on the problems with the research see here.)
Representative Bishop’s questioning about the impact of the proposed rule on existing state law and the appropriateness of the concentration of power in three FTC Commissioners:
FTC Chair Khan’s Written Testimony
In addition to her live testimony, Chair Khan submitted 38 pages of written testimony. Like the live testimony, noncompetes were only a small part of the written submission.
Most significantly, as predicted, Chair Khan’s written testimony reflects that the FTC plans to continue to pursue “enforcement actions”: “The FTC continues to prioritize and investigate allegations that employer conduct is harming workers.” (Emphasis added.)
Between the FTC’s plans to pursue enforcement actions and the NLRB GC’s memo finding that noncompetes violate the NLRA, companies need to be taking action now. While there are certainly those who believe action is not necessary, I am not one of them. The last thing any company needs is to be the target of an FTC enforcement action or unfair labor practices charges.
For most companies, I don’t think a wholesale abandonment of noncompetes is warranted; I think that is an over-reaction. Rather, my general view is the same now as it has always been: Most companies need only consider what agreements they have and what they need, see who really needs to be bound by a noncompete and use narrowly tailored noncompetes for only those people, focus on systemic, programatic protections for trade secrets, customer relationships, and other important at-risk assets of the company (this is an involved process, and should be designed to prevent a loss in the first instance – see the checklist below), and consider all available tools, including other restrictive covenants and springing noncompetes.
To assist, we’ve created the following resources:
- 50-State Noncompete Law Chart, the first of its kind and regularly updated (downloadable PDF);
- Chart of Noncompete “Low-Wage” Thresholds and Criteria (downloadable);
- Notice requirements summary chart, providing details for each of the 8 states (plus D.C.) that has notice requirements related to noncompetes (downloadable PDF);
- “Changing Trade Secrets | Noncompete Laws” (dedicated blog page) now provides a current detailed summary of the changing landscape of trade secret laws and noncompete laws around the country, state by state and at the federal level;
- Trade secret and other legitimate business interest protection plan strategy and checklist; and
- Ten Minute Trade Secret Training Series, currently with three training videos and one “basics” video:
We also have a 50-State and Federal Trade Secret Law Chart, providing a comparison of the trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable PDF).
We hope you find all of these resources useful.
*Thank you to Erika Hahn for alerting me to Chair Khan’s testimony.