On April 19, ABC submitted comments in opposition to the Federal Trade Commission’s unprecedented proposal to ban all noncompete agreements nationwide, a radical departure from hundreds of years of legal precedent. Ultimately, this vastly overbroad rule will invalidate millions of reasonable contracts around the country that are beneficial for both businesses and employees.
In the comments, ABC argued that the FTC lacks the statutory or constitutional authority to issue this rulemaking; noncompete agreements are appropriately regulated at the state level; the proposed rule violates the Administrative Procedure Act; and a blanket ban on noncompete agreements will harm construction employers and employees.
The comment letter includes survey responses from ABC members who explained the benefits of noncompete agreements and how the proposed ban would have a severe adverse impact on their companies as well as their employees.
ABC also joined the U.S. Chamber of Commerce and 280 business groups in submitting comments urging the FTC to rescind the proposed rule.
Background:
On Jan. 5, 2023, the FTC issued a proposed rule that would ban all noncompete agreements with limited exceptions. According to the FTC, the proposed rule would make it illegal for an employer to:
- Enter into or attempt to enter into a noncompete with a worker;
- Maintain a noncompete with a worker; or
- Represent to a worker, under certain circumstances, that the worker is subject to a noncompete.
On Feb. 2, ABC hosted a webinar to highlight how the proposed rule will affect members and why the FTC’s action is constitutionally suspect and open to a strong legal challenge.
On Feb. 16, the FTC hosted a public forum examining the FTC’s proposed rule to prohibit employers from imposing noncompetes on their workers. The FTC heard from a series of speakers who have been subjected to noncompete restrictions, as well as business owners who have experience with noncompetes.
On Feb. 28, ABC joined a coalition letter to Congress denouncing the rule and encouraging the body to use its oversight and appropriations authority to closely examine the proposed rule.
Continue to monitor Newsline for any further updates on the FTC’s proposed rule.