On January 9, 2020, the Federal Trade Commission held a public workshop to examine whether there is a sufficient legal basis and empirical economic support to promulgate a Commission Rule that would restrict the use of non-compete clauses in employer-employee employment contracts. This follows a labor market workshop hosted by the Department of Justice Antitrust Division in September 2019.
Non-compete clauses are covenants in employment contracts that limit the ability of an employee to join or start a competing firm after a job separation. At the workshop, legal scholars, economists, and policy experts will review the current state of the law and economic literature on non-compete clauses in contracts between employers and employees. Academic panels will evaluate the effects of non-compete clauses on labor market participants, and their efficiency rationales (if any). The panels also will consider the potential harms to workers that can and should be addressed through the FTC’s rulemaking, law enforcement, or advocacy authority.
To aid our analysis of these issues, FTC staff is seeking public comment from interested parties on the following questions:
- What impact do non-compete clauses have on labor market participants?
- What are the business justifications for non-compete clauses?
- Is state law insufficient for addressing harms associated with non-compete clauses?
- Do employers enforce non-compete agreements contained in standard employment contracts? How routine is such enforcement?
- Are there situations in which non-compete clauses constitute an unfair method of competition (UMC) or an unfair or deceptive act or practice (UDAP)? How prevalent are these situations?
- Should the FTC consider using its rulemaking authority to address the potential harms of non-compete clauses, applying either UMC or UDAP principles? What “gap” in existing state or federal law or regulation might such a rule fill? What should be the scope and terms of such a rule? What is the statutory authority for the Commission to promulgate such a rule?
- Should the FTC consider using other tools besides rulemaking to address the potential harms of non-compete clauses, such as law enforcement, advocacy, or consumer/industry guidance?
- What additional economic research should be undertaken to evaluate the net effect of non-compete agreements? Should additional economic research on the empirical effects of non-compete agreements focus on a subset of the employee population? If so, which subset?
FTC staff welcomes comment on these and related questions and issues. The process for submitting comments is explained below.
Attending the Workshop
The workshop was free and open to the public.
Live Webcast Details
This event was webcast live.
If you have a question about the workshop or public comment process, please email NonCompetes@ftc.gov.