The FTC Seemingly Thumbs Its Nostril on the Supreme Courtroom

Regardless of the Supreme Courtroom’s current 6-3 ruling in West Virginia v. EPA that regulatory companies will need to have “clear congressional authorization” to make guidelines pertaining to “main questions” which are of “nice political significance” and would have an effect on “a good portion of the American financial system,” and the import of that ruling to the realm of noncompete regulation (which we addressed intimately in Law360), the Federal Commerce Fee (FTC) and Nationwide Labor Relations Board (NLRB) introduced yesterday that they’re teaming as much as tackle sure points affecting the labor market, together with the regulation of noncompetes.

In a Memorandum of Understanding (MOU) issued on July 19, 2022, the FTC and NRLB shared their shared view that:

continued and enhanced coordination and cooperation regarding problems with widespread regulatory curiosity will assist to guard employees towards unfair strategies of competitors, unfair or misleading acts or practices, and unfair labor practices. Problems with widespread regulatory curiosity embody labor market developments regarding the “gig financial system” and different various work preparations; claims and disclosures about earnings and prices related to gig and different work; the imposition of one-sided and restrictive contract provisions, corresponding to noncompete and nondisclosure provisions; the extent and influence of labor market focus; the influence of algorithmic determination making on employees; the power of employees to behave collectively; and the classification and therapy of employees. (Emphasis added.)

Accordingly, the aim of the MOU is “to facilitate (a) data sharing and cross-agency consultations on an advert hoc foundation for official legislation enforcement functions, in a fashion per and permitted by the legal guidelines and rules that govern the [FTC and NLRB](b) cross-agency coaching to coach every [agency] concerning the legal guidelines and rules enforced by the opposite [agency]and (c) coordinated outreach and training as acceptable.”

This follows the Biden Administration’s July 9, 2021 Govt Order by which it “encourage[d]” the FTC to “contemplate” exercising its statutory rulemaking authority underneath the FTC Act “to curtail the unfair use of non-compete clauses and different clauses or agreements that will unfairly restrict employee mobility.” Nothing concrete has but come of that Govt Order, though the MOU maybe represents the following stage of the FTC’s “contemplate[ation]”of the problem. As we beforehand reported, FTC Chairwoman Lina Khan lately instructed the Wall Road Journal that regulating noncompetes “falls squarely in [the FTC’s] wheelhouse,” and she or he has by no means been shy about sharing her view that noncompetes ought to be banned nationwide and that the FTC has the authority to take action. This view doesn’t seem to have modified regardless of the Supreme Courtroom’s determination in West Virginia v. EPA.

Solely time will inform what, if any, motion the FTC takes with respect to regulating noncompetes, but when it does take steps to ban or in any other case restrict noncompetes nationwide underneath Part 5 of the FTC Act, there’ll little question be litigation difficult these rules. And you may wager that the Supreme Courtroom’s determination in West Virginia v. EPA will probably be entrance and heart in any such problem. Certainly, based on Law360, US Chamber of Commerce Govt Vice President and Chief Coverage Officer Neil Bradley stated that the MOU reveals Chairwoman Khan’s imaginative and prescient for the FTC “goes nicely past what’s offered in legislation and what was envisioned by Congress.” Chairwoman Khan doesn’t appear too perturbed by the prospect of challenges to the FTC’s authority on this regard, nevertheless, and appears intent on shifting ahead regardless of the Supreme Courtroom’s admonition.

As at all times, we are going to report right here on any future updates to state or federal legislation regarding commerce secrets and techniques, noncompetes, and different restrictive covenants.