Noncompete Clauses Draw Attention and Possible Regulation from the Federal Trade Commission (FTC).
My friend Eric B. Meyer at Fisher Broyles is my top source of information about trends in employment law. His update on 1/15/20 grabbed my attention even more than it usually does. I have copied large chunks of the post, which appear without comment all the way down to the “Michael’s Analysis” section.
Excerpts from Eric:
Forget what you heard. THIS, right here, will be the biggest employment law concern for employers in 2020.
Last week, the FTC convened a public workshop to address the antitrust and consumer protection issues associated with the use of non-competition agreements in the workplace. One of the items on the agenda was whether the FTC should consider making rules to address the potential harms of non-compete clauses. Another issue was whether the FTC should utilize law enforcement.
Non-competes are what’s up in 2020.
The prepared remarks from Commissioner Rebecca Kelly Slaughter are enlightening.
She emphasized that “competitive markets are the cornerstone of our economy,” which helps to promote higher wages and better benefits for workers, and non-competition provisions chill economic growth. Commissioner Slaughter specifically called them ‘provisions’ and not ‘agreements’ because “they rarely represent real agreements and are instead restrictions unilaterally imposed upon workers by their employers.”
We’ve seen in recent years how the Justice Department has prosecuted so-called “no-poach” and wage-fixing agreements between employers when companies agree not to hire or recruit one another’s employees. They agree not to compete for those employees’ labor.
So, might we see the FTC enter the fray to take on employer misuse of non-competes uniformly? I think so. And I think it will happen sooner rather than later.
How draconian will the FTC be? I don’t know. However, I do know that the lowest hanging fruit is the companies that require everyone to sign a non-compete agreement, from the person sitting in the C-Suite to the person cleaning the C-Suite. In states where non-competes are legal, businesses should be more selective about who must sign.
Even the more selective employers should pay very close attention to the FTC’s possible assault on non-competes in 2020.
Michael’s Analysis:
I agree with Eric that employers in states that still permit noncompete clauses would be wise to stop the blanket use of noncompete clauses. It makes good business sense to only require such clauses of employees (sometimes called “Key Employees”) whose departure would measurably harm the company.
Once the FTC starts paying this level of attention to an issue, employers need to identify the behaviors that drew the attention. If your company is doing those things, I suggest doing a cost-benefit analysis to see if they are more trouble than they are worth.
Michael Oswald
Please note: the above post contains educational information. It is not intended as legal advice. Engage an attorney who is licensed in your state to get advice on dealing with any specific legal issue.
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