MSCI, 100 Firms Ask For More Time To Evaluate FTC Non-Compete Proposal
The U.S. Federal Trade Commission (FTC) recently announced a new proposed regulation that, if enacted, would prohibit the use of non-compete agreements by employers in almost all circumstances.
The Metals Service Center Institute (MSCI) opposes this proposed rule and in a letter sent to the FTC last week, joined with more than 100 other organizations to ask the agency to extend the agency’s comment period for the proposal in order to give the regulated community sufficient time to assess the potential consequences of it and to develop insightful comments for the FTC to consider.
The letter also noted there are significant legal questions that must be addressed by commenters, including whether the FTC has the legal authority to issue such a rulemaking, the rule’s potential preemption of the numerous state laws and other regulations on this issue, and how such preemption might alter the regulated community’s legal obligations.
As Connecting the Dots reported last week, the FTC has said the regulation is necessary in order to combat allegedly unfair methods of competition that violate the Federal Trade Commission Act (FTCA). The FTC claims its proposed rule could increase U.S. wages by nearly $300 billion per year by voiding non-competes for the 30 million Americans the agency says are covered by these agreements. But, according to the U.S. Chamber of Commerce (USCC), the FTC’s economic evidence for this claim is weak. Curtis Dubay, the USCC’s chief economist, explained, “If there are 30 million [Americans] with non-competes, that’s about 1-in-5 workers. There is no way to know for sure whether that figure is accurate because the FTC provides no source for that claim other than itself.”
The rule would also reverse existing non-compete agreements, exacting an economic toll “because it calls into question the sanctity of all existing contracts. This creates uncertainty throughout the economy that slows investment, which lowers wages,” Dubay said.
Another problem is that the FTC’s move comes despite the fact that Congress only has given the agency the authority to identify on a case-by-case basis individual acts that constitute unfair competition. As such, this fight is about more than non-compete agreements, which is why the business community is taking action. If the FTC can regulate non-compete agreements without authorization from Congress, it could have control over virtually every aspect of employment or commercial arrangements. For example, as a next step, the FTC could next declare that businesses’ wage rates or level of benefits are unfair.
MSCI is part of a coalition working to oppose this rule and would value hearing its members’ opinions on how it could impact their workforces. Read more here.