Texas Border Business
US Chamber of Commerce
The Federal Trade Commission released a proposed rule banning employer noncompete clauses in all employment circumstances. This unprecedented attempt overturns well-established state laws which have long governed their use.
Why it matters: Noncompete clauses are important when it comes to fostering innovation and promoting competition. Businesses may use them for a variety of reasons, such as limiting dissemination of trade secrets, access to sensitive information, or ensuring return on investments made in employee training.
Go deeper: The Federal Trade Commission lacks any statutory authority that even comes close to giving it the authority it claims to propose such a rule.
· The only rulemaking authority granted to the agency by Congress is limited and applies to unfair and deceptive acts and practices through specific procedures commonly referred to as “Magnuson-Moss authority”.
· Congress has not authorized the FTC to engage in competition rulemaking. Instead it empowers the FTC to exclusively undertake case-by-case administrative adjudication of competition cases to shape the law.
Bottom line: “Today’s actions by the Federal Trade Commission to outright ban noncompete clauses in all employer contracts is blatantly unlawful,” said Chamber Vice President Sean Heather.
“Since the agency’s creation over 100 years ago, Congress has never delegated the FTC anything close to the authority it would need to promulgate such a competition rule. The Chamber is confident that this unlawful action will not stand.”
