The Center On Executive Compensation has submitted comments to the FTC following the Commission’s January 9 workshop on the impact of non-compete agreements on the labor force, with the Center recommending the FTC not implement a “one size fits all” ban on non-compete agreements, if it chooses to regulate at all.
The Center's Position. The Center asserted that additional FTC rulemaking is unnecessary given that the broad body of existing state law stipulates non-compete agreements must be reasonable in scope and duration to be enforceable. However, if the FTC were to consider rules on non-compete agreements, the Center encouraged the FTC to draw a clear distinction between the use of such agreements at the senior level and for specific employee classes with access to sensitive technical knowledge or customer/account information.
Non-Competes Are Useful for Certain Classes of Employees. The Center’s comments highlighted that Subscriber companies believe non-compete clauses, when used responsibly, can help companies protect vital investments in their employees while ensuring the security of research and development, trade secrets, and institutional knowledge. The comments reflected acknowledgement by panelists at the FTC hearing that while non-competes may be appropriate for executives and highly trained employees, there are significant concerns with the use of such agreements for hourly and middle-income employees.
Greater Policymaker Interest in Non-Competes. Overall, the tone of the FTC’s workshop was critical of non-compete agreements, driven by several high-profile cases of broadly applied non-compete agreements. As the Center has previously highlighted, Federal bipartisan legislation has been proposed, with Sens. Todd Young (R-IN) and Chris Murphy (D-CT) introducing the Workforce Mobility Act in October of 2019 “to limit the use of non-compete agreements that negatively impact American workers.” Further, California, North Dakota, and Oklahoma prohibit them in nearly all cases, while Washington prohibits them for employees making less than $100,000. Hawaii has prohibited such agreements for employees in the technology sector.
The FTC has extended the comment period until March 11, 2020(as of Feb. 14, there are 277 comments).
