Everyone has been talking about the FTC’s proposed non-compete ban in the last couple of weeks, and the majority of articles have focused on its benefits, such as increased employee mobility and higher wages. Reading these articles, one may believe that the ban is all but a foregone conclusion.
However, the ban is facing a lot of opposition from a variety of powerful organizations:
- U.S. Chamber of Commerce – The Chamber, which is the largest lobbying group in the US with over $60 Million in lobbying spend, penned a pretty strong letter stating that “the Chamber sees no need for the FTC to contemplate rulemaking, particularly given its limited rule-making authority, its existing antitrust enforcement powers, the role of the courts, and the ability of the states to regulate if they so desire.”
- American Medical Association – Without a doubt, thousands of physicians who are currently bound by non-compete agreements, joyously perked up at the news of the FTC’s proposed ban. However, AMA has previously wrote a letter to the FTC arguing that the commission should not engage in the regulation of the non-compete agreements and should instead allow states to regulate this issue.
- The United States Senate – Nine senators submitted a letter encouraging the FTC to regulate non-compete agreements, but recommended that such agreements be limited to senior executives – a recommendation that the FTC thoroughly ignored by proposing a ban on all non-competes, including those of senior executives.
- The Restaurant Law Center – The legal arm of the National Restaurant Association, which is not shy about filing lawsuits against the government to stop the implementation of rules that may hurt the restaurant industry, submitted a statement to the FTC arguing that the restaurant industry needs reasonable non-compete agreements with salaried and managerial employees, who have access to confidential information and employer-provided training.
- The Antitrust Law Section of the American Bar Association – The section, while not directly opposing a ban on non-compete agreements, expressed doubts about the FTC’s authority to issue a nationwide rule and cautioned that the FTC should ensure that any rule it promulgates represents “the least restrictive alternative” among possible rules so as not to “chill pro-competitive and pro-innovation uses of non-compete clauses.” The FTC entirely ignored this recommendation in crafting a complete and total ban on ALL non-compete agreements.
Additionally, thousands of small to medium-size business owners submitted comments to the FTC explaining that a ban on all non-compete agreements is going to harm their business.
For example, one business owner wrote:
As a small business, we oppose the proposed rule change to ban non-compete agreements. Small businesses in niche industries invest in their employees – with pay, training, and sensitive business information. Placing a complete, overly broad ban on non-compete agreements opens the door for those businesses to lose not only their investment in their employees, but also trade secrets to competitors.
Small business owner
Other small business owners expressed similar sentiments:
I own a small business (less than 10 employees). We spend a lot of time with our employees and due to the size of our company they have access to very critical information about our company. Abolishing the non-compete allows employees to separate from our company and take this information to a competitor, or start-up their own company with all of our years of work.
Small business owner
This is a bad idea. I am a piano tuner, a sole proprietor. Let’s say I hire an individual to help me tune my clients’ pianos. If there is no non-compete clause possible, this person can work for a year then open his own business and take some of my clients with him. I can’t afford that, so why would I take that risk? I would not offer that job. Eliminating the non-compete is bed for small businesses. Small business should be exempt from this regulation.
Small business owner
CONCLUSION: The ban on non-compete agreements is far from becoming a reality. Therefore, employees should continue to exercise caution when signing non-compete agreements and, when in doubt, consult with an attorney. Employers should continue to monitor this issue and, meanwhile, make sure that their non-disclosures, non-solicitation, and no-poach agreements are rock-solid.
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.