Advocacy News – April 20, 2023
The MI Chamber submitted comments to the Federal Trade Commission (FTC) this week in opposition to its regulatory proposal to ban employers from using noncompete clauses for their employees.
The MI Chamber’s comments can be read here. The Chamber signed onto a coalition letter in opposition, which can be read here.
The proposed rule, if adopted, would have far-reaching impact across industries. It is estimated that it could impact about 30 million workers nationwide by preventing employers from entering into noncompete agreements with workers and require employers to rescind existing noncompete agreements and provide notice that these clauses are no longer in effect.
The FTC says noncompetes — contractual covenants in which employees agree not to accept similar employment with a competitor after their employment period is over — harm competition by blocking workers from pursuing better opportunities and by preventing employers from hiring the best available talent. But opponents, including the MI Chamber, US Chamber and others, believe the FTC has overstepped its authority and will have a negative impact on innovation and competition.
Michigan Attorney General announced Thursday that she had joined an 18-state coalition, led by California, New Jersey, and the District of Columbia, that submitted comments in support of the proposed rule, arguing “[n]on -compete statutes are also often misused for anti-competitive purposes that do not protect legitimate business interests. I stand firmly with my colleagues in supporting the FTC’s proposed rule to provide workers with additional protections in this area.”
If adopted, the final version of the rule would not become effective for at least 240 days, and then it is likely to be met with legal challenges.
In a recent survey of MI Chamber members, 77% of respondents indicated their company utilizes contract clauses such as non-competes, non-solicits or forfeiture provisions in equity award agreements, severance agreements and/or employment agreements. Over 95% indicated they utilize non-competes in employment agreements. The FTC’s proposed rule would invalidate these agreements, which are a crucial tool in fostering innovation and preserving competition.
Thank you for the opportunity to share our views and to oppose the proposed rule. Please contact Wendy Block at wblock@michamber.com with any questions.