FTC Rule Would Ban Noncompete Agreements for All Employees and Independent Contractors
The U.S. Chamber is calling on Congress to oppose the Federal Trade Commission’s (FTC) proposed rule banning almost all non-compete agreements. The U.S. Chamber is very concerned that the FTC’s proposed rule exceeds its statutory legal authority, and they argue that if it is allowed to proceed, it will represent only the beginning of a larger effort by the FTC to regulate American business. The Columbia Montour Chamber is seeking your feedback regarding support of the coalition letter, by way of a member survey about the potential impact on your business. Please consider answering the survey below to better inform the Chamber's Governmental Affairs Committee on this matter.
In a coalition letter written to Congress, the U.S. Chamber says,
"We write to unequivocally oppose the Federal Trade Commission’s (FTC) proposed rule to impose a nationwide ban on almost all noncompete clauses. The FTC lacks the constitutional or statutory authority to issue such a rule and, in attempting to do so, the agency is improperly usurping the role of Congress.
Moreover, this sweeping rule would invalidate millions of contracts around the country that courts, scholars, and economists have found entirely reasonable and beneficial for both businesses and employees. Accordingly, we ask you to exercise your oversight and appropriations authority to closely examine the FTC’s proposed rulemaking.
Congress never granted the FTC the statutory authority to issue rules regulating competition, such as the contractual relationship between employers and employees, which even advocates for action in this area, like Sen. Chris Murphy (D-CT), recognize. [i] Rather, Congress granted targeted statutory authority to FTC to issue rules to protect consumers, such as to prevent fraud and false advertising. The FTC’s authority with respect to competition issues is limited to adjudicating individual cases where competition issues are involved where the FTC must consider the factual context and reasonableness of conduct in each such matter.
The FTC has not attempted to promulgate a competition rule for decades, across administrations of both parties. In the past, Congress curbed FTC’s excesses with appropriations riders, and we encourage Congress to revisit such tools today.
The Supreme Court recently recognized the important Constitutional limitations on the ability of executive agencies to issue major rules such as that proposed here without clear guidance from Congress. Two years ago in AMG Capital Management v. FTC, for example, the Supreme Court unanimously rejected the FTC’s claims that it could interpret its own statutes to claim broad authority. In cases involving other agencies, courts have invoked the major questions and non-delegation doctrines to strike down agency excesses and to preserve the role of elected officials in addressing important issues. We urge Congress to reassert its Constitutional role to resolve issues of national importance and limit attempts to usurp this authority through unauthorized regulatory overreach.
Finally, the FTC’s blanket ban on noncompete clauses is vastly overbroad and likely will harm both employees and employers. Courts, scholars, and economists all have found that noncompete clauses, when properly used, encourage investment in employees and help to protect intellectual property. Forty-seven states permit noncompete clauses, which have traditionally been an issue of state law.
To be sure, courts do not and should not enforce unreasonably restrictive noncompete clauses, but therein lies the wisdom of our current system: reasonable, procompetitive noncompetes stand, whereas unreasonable, anticompetitive ones fall.
We thank you for your attention to this issue and we ask you to exercise your oversight and appropriations authority to reign in FTC’s unauthorized rulemaking banning noncompete agreements.
The deadline to join the letter is Monday, February 27th at 5:00 pm ET / 4:00 pm CT.