As our antitrust colleagues defined not too long ago, on August 26, 2022, the Federal Commerce Fee (FTC) printed its “Strategic Plan for Fiscal Years 2022–2026,” as required underneath the GPRA Modernization Act of 2010. Readers of this weblog will probably be fascinated about two small, however essential, gadgets within the Strategic Plan associated to noncompete agreements.
First, underneath “Goal 2.1: Establish, examine, and take actions in opposition to anticompetitive mergers and enterprise practices,” the FTC opinions that “[a]anticompetitive mergers and enterprise practices hurt Individuals by means of greater costs, decrease wages, or decreased high quality, alternative, and innovation. Enforcement of antitrust legal guidelines supplies substantial advantages to the general public by serving to to make sure that markets are open and aggressive.” It then identifies sure “[s]methods” that the FTC intends to pursue over the following 5 years, together with “[i]creas[ing] use of provisions to enhance employee mobility together with limiting the usage of non-compete provisions.” It is unclear precisely what provisions it intends to extend its use of, however however the FTC will probably be targeted on the problem.
Later, underneath “Goal 2.2: Interact in analysis, advocacy, and outreach to advertise public consciousness and understanding of truthful competitors and its advantages,” the FTC identifies, as one other technique it intends to pursue, “[f]ocus[ing] on employees: Research and examine the influence on employee wages and advantages from merger and nonmerger conduct, in addition to non-compete and different doubtlessly unfair contractual phrases ensuing from energy asymmetries between employees and employers.” The FTC has been “finding out” this problem for a number of years now, having held a number of public workshops, however apparently it intends to proceed its research of the problem.
There’s frankly not a lot new in these statements, and what’s most attention-grabbing (though not essentially most telling) could also be that these “methods” are watered down considerably from FTC Chairwoman Lina Kahn’s said want to make use of the FTC’s rulemaking authority to ban noncompetes ( though extra in keeping with President Biden’s July 9, 2021 Govt Order through which he “encourage[d]” the FTC to “think about” exercising its statutory rulemaking authority “to curtail the unfair use of non-compete clauses and different clauses or agreements that will unfairly restrict employee mobility”).
As we’ve beforehand written in Law360it’s questionable whether or not the FTC even has the authority to control, a lot much less prohibit, noncompetes, notably following the Supreme Court docket’s choice in West Virginia v. Environmental Safety Company, through which the Court docket additional elucidated on the “Main Questions Doctrine.” Nonetheless, regardless of that call, and regardless of the FTC’s seemingly watered-down strategy to noncompetes in its 5-year Strategic Plan, it will not come as a shock if the FTC issued proposed guidelines limiting, if not outright prohibiting, noncompete agreements nationwide. Certainly, as we beforehand reported in July, the FTC entered right into a Memorandum of Understanding with the Nationwide Labor Relations Board (NLRB) saying their “continued and enhanced coordination and cooperation regarding problems with widespread regulatory curiosity,” which they recommend “will assist to guard employees in opposition to unfair strategies of competitors, unfair or misleading acts or practices, and unfair labor practices.” The FTC and NLRB expressly recognized as an “[i]ssue[] of widespread regulatory curiosity. . . the imposition of one-sided and restrictive contract provisions, similar to noncompete and nondisclosure provisions.”
We’ll proceed to observe the FTC’s feedback and actions concerning noncompetes and report again with any materials updates.