The comment period for the Federal Trade Commission’s proposed ban on noncompete agreements came to a close last week, bringing with it more than 18,000 comments from individuals, associations and businesses.
The proposed rule would prohibit employers, in most cases, from asking workers to sign noncompete clauses, which the agency says suppress workers’ wages and stifle competition.
Under the rule, businesses would have to get rid of existing noncompete clauses as well. The commission estimates about 1 in 5 workers are affected by noncompetes and says the rule would up employees’ earnings $250 billion to $296 billion each year.
Public comments were largely split along the employer/employee divide. Most employers and associations representing business interests seemed to be against the ban, claiming it would put sensitive business information and trade secrets at risk. They also questioned the commission’s authority to pass the legislation.
On the worker side, most comments from individuals and groups advocating for worker rights seemed to support the ban, saying noncompete clauses limit career prospects for employees and hurt their earning potential.
The HR Policy Association, which represents chief human resource officers at more than 400 companies in the U.S., said, “In essence, the commission is throwing the baby out with the bathwater.”
Gregory Hoff, associate counsel for organization, said the new rule is too far-reaching. Rather than a broad ban on noncompetes, the “final rule should specifically exempt executive level employees, as well as employees with access to trade secrets and other proprietary or confidential information,” Hoff wrote.
Hoff said noncompetes don’t unfairly prevent competition, they “prevent only unfair competition,” and that most noncompetes don’t prevent workers from leaving a company and finding another job, they just require a “cooling off” before accepting a new position.
In the submitted comment, Hoff also said HR Policy Association doesn’t think the commission has the right to pass noncompete legislation because it does not have “substantive rulemaking authority.”
That sentiment was echoed by several other business groups, including the Food Industry Association (FMI), which represents food retailers, wholesalers and product suppliers in the food industry. The FTC “instead should focus on enforcing laws already authorized by Congress,” wrote Stephanie Harris, chief regulatory officer and general counsel for the Food Industry Association, and Christine Pollack, vice president of government relations.
“Many of FMI’s members use non-compete clauses, and do so almost exclusively in agreements they enter into with executive-level and highly skilled workers. In FMI’s experience, these agreements provide vital protection for companies’ sensitive business information and trade secrets,” Harris and Pollack wrote.
On the other side, the Antitrust Section of the American Bar Association said that noncompetes for low-wage workers “are generally not justified or beneficial” and make those workers vulnerable to signing agreements without fully understanding their future effects or the ability to use legal resources to challenge those agreements.
“Non-competes often do not benefit the individual low-wage workers who are subject to them. Specifically, low-wage workers may be harmed by the restrictions on their ability to accept the best available jobs and are often not compensated for this harm,” the section wrote.
Likewise, the American Nurses Association, which represents registered nurses, said it “strongly supports the FTC’s proposal to ban most non-compete agreements.”
“Non-compete agreements undermine competition and close parts of the market to some classes of workers, including nurses in many cases. This harms the employees as they are unable to work in their field without paying expensive penalties to their original employer. It may also harm employers as it severely limits the pool of possible employees,” Debbie Hatmaker, chief nursing officer and executive vice president of the American Nurses Association, wrote in a submitted comment. “... It would seem that the only reason healthcare employers require nurses to sign non-compete agreements is to enhance retention and to control where any future employment occurs.”