The Implications of the FTC’s Proposed Ban on Noncompete Agreements
In January 2023, the FTC announced a proposed rule that would ban noncompete agreements across most of the U.S. economy – a move President Biden lauded in his recent State of the Union address. While noncompete clauses have existed for centuries and have traditionally been regulated under state law, they have also become a focal point for the executive and legislative branches of late. The FTC’s proposed rule represents a recent effort to shift enforcement, both substantively and procedurally. The proposed rule purports to rely on the Commission’s “unfair methods of competition” (UMC) authority under Section 5 of the FTC Act. This is the first time in decades the FTC has sought to engage in a UMC rulemaking, and only the second time it has ever done so.
Questions are already beginning to arise as to not only the substantive benefits of such a ban, but also the FTC’s underlying authority to enact this rule. As a threshold matter, the FTC’s ability to engage in UMC rulemaking is somewhat unclear – the statutory basis for this authority is hotly disputed and very likely to be challenged. The FTC’s assertion that the rule would supersede contradictory state laws is also likely to draw challenges. Moreover, many have raised concerns that the proposed rule – which the FTC argues would immediately impact about 20% of the U.S. workforce – runs afoul of the major questions and nondelegation doctrines. Additionally, there are questions regarding how such a rule would ultimately impact employees, employers, and the workforce more broadly – in particular, whether such a ban is more likely to enhance or impair innovation. Our experts discuss the genesis of the FTC’s proposed ban on noncompete agreements, including the statutory and empirical evidence underpinning the rule, as well as what we can expect in the coming months and years as the FTC moves towards adopting and enforcing the rule.
Gibson, Dunn & Crutcher, LLP
Deputy Director, Bureau of Competition
Federal Trade Commission
Internet Policy Counsel and Director of Appellate Litigation
Director, Center for Energy, Climate, and Environment and The Herbert and Joyce Morgan Fellow in Energy and Environmental Policy
The Heritage Foundation
Professor of Law and the Menard Director of the Nebraska Governance and Technology Center
University of Nebraska College of Law
Assistant Professor of Law
University of Baltimore
Robert H. Smith School of Business, University of Maryland
Kirkland & Ellis LLP
Antitrust & Consumer Protection
Federalist Society’s Corporations, Securities, & Antitrust Practice Group
Federalist Society’s Labor & Employment Law Practice Group
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