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Larry Carbo, Shareholder and Co-Chair
Diana Perez Gomez, Shareholder and Co-Chair
Julie Offerman, Shareholder
Kellen Scott, Shareholder
Leslie Tan, Senior Counsel
Elizabeth Feeney, Associate
AmyJo "AJ" Foreman, Associate
Chamberlain Hrdlicka Blawgs
Yesterday, the FTC hosted a virtual forum during which six speakers from various industries provided their reactions to the proposed ban on non-compete agreements. The President of a Tennessee logistics company who founded the website www.endnoncompetes.com offered his opinion that non-competes are unnecessary and used to bully young people. He proudly announced that his company currently is violating around 100 non-compete agreements. A former Chief Human Resources Officer who now represents a public policy organization that advises chief human resources officers advocated for reasonable non-compete restrictions that protect employer investment. Her association opposes the FTC’s blanket ban on nearly all non-compete agreements and recommended the FTC allow non-competes for senior-level employees. An oncologist from Florida likened non-compete agreements to drug cartels and blamed non-competes for avoidable deaths, toxic workplaces, and physician burnout. The CEO of an investment firm that focuses on economically distressed communities supports the proposed Rule because he expects the ban will foster new businesses and, along with that, new jobs. An in-house lawyer for a defense, security, and aerospace company opined that non-competes provide vital and unique protection for employers that other contractual provisions cannot, i.e. nondisclosure agreements. The final speaker was a residential caretaker from Minnesota who accused corporations of “rigging the system” to prevent workers from seeking better pay and working conditions.
After the FTC’s Director of Policy and Planning facilitated a Q&A session with the panelists, the forum proceeded to the public comment phase where numerous individuals were allowed to offer their opinions on the proposed Rule—in two-minute intervals. Many public commenters supported the proposed Rule, while many others opposed the Rule. Some who support the ban referred to non-competes as contracts of adhesion and believe they detract from a pro-innovation marketplace. At least one commenter urged the FTC to strengthen the proposed Rule and ban additional categories of agreements. Another asked the FTC to ban all training repayment agreements, not just those that could operate as a de facto non-compete. Opponents believe the FTC lacks the authority to impose the ban. Many took issue with the ban being too broad. Others challenged the scholarship and evidence on which the FTC relies to support its proposed rulemaking. Several opponents complained about the proposed Rule’s retroactivity and its rescission requirement for existing agreements. A common refrain from opponents included a plea for the FTC to extend the comment period by sixty days to allow for a more fulsome comment period.
The Commissioner who dissented from the proposed Rule, and who recently announced her intention to resign from her position, did not participate in the forum. The Chair and the other two Commissioners did participate. And while the Chair opened the forum by referring to the proposed ban as “just a proposal,” it appears the Chair and the other Commissioners are aligned in their purpose. During his closing remarks, Commissioner Bedoya seemed to respond to prior commenters who suggested senior executives frequently negotiate and accept non-compete restrictions in return for valuable consideration and are not, therefore, subject to coercion or exploitation. Commissioner Bedoya seemed to dodge this argument by saying the FTC’s rationale for banning non-competes for senior employees is that they harm competitive conditions generally and impede new business. And, in response to an earlier remark from an FTC representative about the proposed Rule not banning non-compete agreements between franchisors and franchisees, Commission Bedoya closed his remarks by urging franchisees to submit their comments because he is particularly keen to understand their position. Could the FTC broaden its rule to apply to franchisees and not just “workers”?
Stay tuned. There’s going to be a fight.