FTC Announces First Step Towards Regulation of Employee Non-Competes

As we have noted previously, on July 9, President Biden signed an Executive Order on Promoting Competition in the American Economy. Amongst many different issues, this Govt Order calls on the Federal Commerce Fee (FTC) to “consider … exercis[ing] the FTC’s statutory rulemaking authority … to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” A webinar on this subject is on the market here; and extra details about the Govt Order typically is on the market right here.

Though the Govt Order was signed in July, the FTC has not but taken any public motion in the direction of the regulation of non-competes. Half of the rationale for that is bandwidth, because the FTC has been very busy advancing a progressive agenda within the areas of client safety and merger enforcement. One other half is political. The FTC is a five-member Fee, and not more than three of its members could be from the identical political social gathering. When President Biden signed the Govt Order, the FTC had three Democratic Commissioners and two Republicans. In October, nevertheless, one of the three Democratic Commissioners was confirmed to guide the Client Monetary Safety Bureau, which as of this writing places the FTC at a 2-2 political tie. The 2 Republican Commissioners have voiced skepticism about an FTC regulation on non-competes, with one arguing that worker non-competes are finest regulated by the states and the other arguing {that a} federal regulation may not even be constitutional below the “non-delegation” doctrine. Subsequently, the FTC is unlikely to make any main coverage strikes till after a 3rd Democratic Commissioner is confirmed (which is unlikely to occur till late 2021 or early 2022).

Within the meantime, nevertheless, the FTC is laying the groundwork for future rulemaking. As an preliminary step, the FTC recently announced a workshop (co-hosted by the Division of Justice’s Antitrust Division) to be held on December sixth and seventh, “to discuss efforts to promote competitive labor markets and worker mobility.” The agenda for the workshop is:

Over the 2 days, a collection of panels, shows, and remarks will handle competitors points affecting labor markets and the welfare of staff, together with: labor monopsony; the elevated use of restrictive contractual clauses in labor agreements, together with non-competes and non-disclosure agreements; info sharing and benchmarking exercise amongst competing employers; the position of different federal companies in making certain honest competitors in labor markets; and the connection between antitrust regulation and collective bargaining efforts within the “gig economy.” Panelists can be invited to debate potential steps antitrust enforcers can take to higher goal enforcement sources, enhance public steerage, and pursue a “whole of government” method to making sure honest competitors for staff and customers by leveraging interagency sources.

events are invited to submit public feedback on the subjects lined by the workshop anytime between now and December 20, 2021.

In gentle of the Govt Order, it’s affordable to imagine that the workshop can be used to develop a factual report to help a possible future FTC regulation on worker non-competes. For example, before the FTC can issue a proposed rule, it will need to have purpose to imagine that the practices at challenge within the rulemaking are “prevalent.” The FTC can be arguably required to indicate that the practices at challenge are “likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.” We count on the two-day workshop to cowl these and different factual subjects, with the intent of placing the FTC in place to maneuver shortly on the potential regulation of worker non-competes after a 3rd Democratic Commissioner is confirmed.

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