On January 9, 2020, the Federal Trade Commission (“FTC”) held a public workshop in Washington, DC to examine whether there is a sufficient legal basis and empirical economic support to promulgate a Commission rule that would restrict the use of non-compete clauses in employment contracts. At the conclusion of the workshop, the FTC solicited public comments from interested parties on various issues, including business justifications for non-competes, effect of non-competes on labor-market participants and efficacy of state law for addressing harms arising from non-competes.
On March 12, 2020, attorneys general from seventeen states (including California, Illinois, New York and Washington), Puerto Rico and the District of Columbia (the “AGs”) submitted extensive comments to the FTC. The AGs take the position that non-competes harm workers by suppressing wages and degrading non-wage benefits, and harm consumers by reducing business’ access to skilled and unskilled labor and by reducing innovation. The AGs find the usual justifications for non-competes (to protect trade secrets and investments in training workers) unpersuasive, and note that non-competes–particularly for low wage workers–usually are not freely bargained for.
Declaring their support for “federal rulemaking that is consistent with our ability to pursue enforcement and legislative priorities to the benefit of workers and consumers,” the AGs also ask that the FTC work with AGs to tackle abusive use of non-competes through enforcement actions, further study, issuance of guidelines, and educational initiatives.
In the coming weeks, the FTC will be evaluating the AGs’ comments, as well as comments from many other groups and individuals, as it decides what further actions, if any, it will take with regard to non-competes. Stay tuned.
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