The Kansas Chamber joined with more than 260 other business advocacy groups on a letter opposing a proposed rule by the Federal Trade Commission that would eliminate noncompete agreements and void existing noncompete contracts.
The U.S. Chamber of Commerce continues gathering signatures for its letter opposing a proposed rule. The FTC’s comment period for the rule was initially March 20, but the period was recently extended to April 19, 2023. Letters to the U.S. Congress have raised concerns about the FTC’s competition rulemaking and its blanket ban on noncompete agreements.
According to James Spencer, employment law and executive compensation attorney for Hinkle Law: “Over 11,000 comments have been submitted so far. Once the comment period closes, the FTC will review the comments and prepare a final rule. This will likely occur sometime in 2023.”
The U.S. Chamber’s letter will become part of the official record for the rule. The deadline for signatures on the letter is April 12. Business advocacy groups across the U.S. have been quick to sign on to the letter.
“The Kansas Chamber strongly opposes the proposal by the FTC to eliminate noncompetes,” said Kansas Chamber President & CEO Alan Cobb. “Noncompete agreements are essential for businesses and their employees, and the FTC simply doesn’t have authority to issue the proposed rule. Contrary to supporters of this proposal, we think it’s clear noncompetes are good for competition overall. We agree with the expert findings cited in the U.S. Chamber’s letter that indicate noncompete agreements advance employee investment and support intellectual property protection.”
Despite concerns that the proposed FTC rule would be a burden for U.S. businesses, some consumer advocacy groups contend that the labor market functions better without such restrictions. Public Citizen Executive Vice President Lisa Gilbert said employees should be empowered to change employers, start new businesses and leverage offers to improve their station. Public Citizen’s research has found that non-compete clauses limit worker mobility.
“The use of these clauses by employers, does ongoing damage,” Gilbert said. “Consumers need to be able to use companies that are most effective and have workers that can move between them. We don’t want concentrated markets which drive up prices and cause harm to marginalized people as they try to seek the best opportunities in the employment market. This is an important change, and we really hope that they propagate the final rule that just categorically bans the use of noncompetes.”
While some view the expansiveness of such a ban as a good thing for the labor market, others have concerns about its broad impact.
In addition to prohibiting future noncompete clauses, the FTC’s rule would affect existing noncompetes as well.
“If the proposed rule goes into effect in its current form, it will not only prohibit employers from having any sort of noncompete clauses with employees; it will also require them to rescind any existing noncompetes and notify employees and former employees of the rescission,” Spencer explains.
There are many ways in which the FTC’s proposal could be narrowed. However, business advocacy groups like the U.S. Chamber and Kansas Chamber hold that the FTC lacks the authority to issue regulation on this issue. The letter by the U.S. Chamber states that authority has been granted to Congress to address questions of fair competition.
