Advocacy News – May 28, 2024
Last week, the MI Chamber joined over 250 state and national trade and business associations in urging the Federal Trade Commission (FTC) to stay the effective date of its new Noncompete Rule (“Rule”) as the litigation challenging it – and the FTC’s authority – continues.
What happened: In April, the FTC adopted a Rule to prevent employers from entering into noncompete agreements with workers and require employers to rescind existing noncompete agreements. The Rule:
- Provides for a comprehensive ban on new noncompetes with all workers, including senior executives.
- The final rule provides that it is an unfair method of competition — and therefore a violation of Section 5 — for employers to enter into noncompetes with workers.
- Adopts a different approach for existing noncompetes. For senior executives, existing noncompetes can remain in force; however, existing noncompetes with workers other than senior executives are not enforceable after the effective date.
- The Rule defines senior executives as workers earning more than $151,164 annually and who are in policy-making positions.
The Rule currently is being challenged in court by the U.S. Chamber and Business Roundtable in federal court in the Eastern District of Texas. The lawsuit challenges whether the FTC exceeded its legislative and administrative authority by outlawing what it deems unfair methods of competition.
Why it matters: There are several reasons a stay would be prudent. Not only is the Rule’s legal fate uncertain, the Sept. 4 effective date is of concern and so is the lack of FTC guidance on key terms and provisions. This is creating substantial uncertainty for businesses and employees around the country, especially given its sweeping scope. It is estimated that it could impact tens of millions of workers nationwide.
Go deeper: Read the coalition letter sent to the FTC.