March 13, 2023

FTC Listens To Industry, Extends Comment Deadline On Proposed Non-Compete Rule

As Connecting the Dots reported at the time, the Metals Service Center Institute, the U.S. Chamber of Commerce (USCC), and other business groups sent a letter to the Federal Trade Commission (FTC) asking it to extend its comment period for a proposed regulation that would make it illegal for an employer to:

  • Enter into or attempt to enter into a non-compete with a worker;
  • Maintain a non-compete with a worker; or
  • Represent to a worker, under certain circumstances, that the worker is subject to a non-compete agreement.

And then, earlier this month, MSCI, USCC, and more than 260 other groups followed that request with a letter to lawmakers in the U.S. House of Representatives and U.S. Senate asking them to oppose the FTC’s proposed rule and exercise its oversight and appropriations authority to rein in FTC’s unauthorized rulemaking banning noncompete agreements.

Last week, opponents of this rule achieved a small victory when the FTC announced it will agree to MSCI and USCC’s request to give the public an additional 30 days to comment on the proposed non-compete rule.

The public now has until April 19 to comment on the proposed rule.

In a statement separate from the FTC’s official one, FTC Commissioner Christine Wilson said that if it had been solely up to her, she would have supported an even longer extension for the comment period since the proposal is “a departure from hundreds of years of precedent.”

The proposal has sparked widespread concern among the business community on how a national ban on non-competes could impact their businesses’ investment in employees and affect the protection of sensitive information and intellectual property.

Manufacturers use non-compete agreements only for select workers handling their most sensitive information. That information might include the details of a company’s most sophisticated processes and strategies, which cannot be allowed to fall into competitors’ hands. Not only do these employees handle the keys to a company’s success, but they are the recipients of significant investments in time, compensation and training. By signing a non-compete agreement, they may, for example, agree not to share any sensitive information while serving in their integral role or not to work for a competitor in the near future where they could share that information.

Banning non-compete agreements would force companies to revamp their human capital operations completely. Trade secrets or other essential information could be exploited not only by competitors, but also by foreign adversaries. Manufacturers would be forced to put in place burdensome controls or silo parts of their operations from each other, which would result in less training for employees and less efficiency across various divisions.

As such, MSCI encourages individual member companies that could be impacted this proposed rule to make their voices heard. Click here to learn how to submit a comment letter. As noted above, the new deadline for comments is April 19, 2023. The U.S. Chamber of Commerce provides information here and here that can be used to use in these letters.

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