House Education and the Workforce Chair Virginia Foxx (R-NC) submitted a letter to the FTC expressing serious concerns regarding its proposed rule banning non-compete agreements. The letter argues that the Commission lacks authority to ban non-competes and highlights the negative implications banning non-competes will have on company investments in their employees.
Banning non-competes exceeds FTC authority: Rep. Foxx’s letter argues that the Commission lacks the statutory authority to issue a sweeping ban on non-compete agreements, citing the recent Supreme Court decision in West Virginia v. EPA as a clear limit on major agency action that is unsupported by congressional authorization. “The FTC cannot demonstrate clear congressional authority for its rulemaking since it was granted no such authority under federal law,” the letter states.
Negative consequences for worker investment: The letter further argues that banning non-competes “could reduce employer investment in employees.” The letter cites academic research suggesting that non-competes are often used to encourage more investment in workers, and notes that employee investment is particularly critical at a time when the country continues to face a shortage of skilled labor.
Outlook: HR Policy will submit comments to the FTC regarding its proposal to ban non-compete agreements and will highlight many of the same issues identified by Rep. Foxx. Comments are due April 19, with a final rule possible before the end of the year.
