Noncompete ruling could have local effects
Apr. 28—Authorities in Washington have approved a total ban on almost all employment deals that are meant to keep workers from taking their talents elsewhere after they leave their jobs, and this could have local effects.
The Federal Trade Commission, an independent agency of the U.S. government, voted 3-2 on Tuesday to implement the Non-Complete Clause Rule. Taking effect in late August, pending any litigation, the rule is meant to stop employers from creating new contracts with a noncompete clause. The vote, which saw FTC members split along Democratic/Republican party lines, completes a process started in January 2023. The FTC has broad power to pass rules under the Federal Trade Commission Act of 1914.
"The final rule provides that it is an unfair method of competition ... for employers to ... enter into non-compete clauses with workers on or after the final rule's effective date," the FTC said in a news release.
David Dudeck, who founded Quicksilver Technology & Consulting in St. Joseph after several years of work in corporate information technology services, said he has signed contracts that contained a noncompete clause in years past. Dudeck did not consider the clause to be enforceable at the time, he said, but he abided by it anyway to avoid hassle and legal expense.
"This just kind of takes all of the legal mess away," he said. "There's no binding mechanism there. If a company doesn't want to hire because of that comfort blanket, they're probably looking at it the wrong way in the first place."
The FTC has estimated that as many as 30 million workers are currently subject to noncompete clauses. Some are in high-skill fields, like surgical medicine, scientific research or engineering. However, sandwich chain Jimmy John's made headlines in 2016 when it was revealed that they had been enforcing noncompetes by suing past restaurant workers who went to work at another eatery; breach of contract had been alleged. That practice ended by 2018 after several states took action.
Barring any court order that stops the FTC Non-Complete Clause Rule from taking effect, companies will be required by September to announce the rule to their employees. They will not be allowed to create new contacts with such clauses and will be required to notify all parties to past contracts that the clause can no longer be enforced. Certain exceptions apply, for workers who earn more than $150,000 per year, and for senior executives who have the power to change company policy, among others.
FTC members serve for seven-year renewable terms after appointment by the president of the United States. The Democratic majority on the panel exists after appointments in 2021 and 2022 by President Joe Biden. As the FTC Act prohibits any more than three members from being from the same party, two other members who have been appointed this year are Republicans.
The U.S. Chamber of Commerce, which most often aligns with the GOP, blasted the FTC rule as a form of governmental micromanagement. The chamber will sue the FTC to invalidate the rule, it said.
"The Federal Trade Commission's decision to ban employer noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses' ability to remain competitive," the chamber said in a news release.
There could be cause to believe that the FTC will not have the last word on this issue. The U.S. Supreme Court, in the last 20 years, has become more amenable to Major Questions Doctrine, which holds that federal agencies must be able to justify their actions with the clear and unambiguous approval of Congress. If Congress has not passed a law that blesses a significant change, the judiciary may well stop it in its tracks and undo whatever the change sought to accomplish.
Marcus Clem can be reached at marcus.clem@newspressnow.com. Follow him on Twitter: @NPNowClem
