Washington, D.C. — The American Economic Liberties Project today submitted written comments to the Federal Trade Commission in response to the agency’s Notice of Proposed Rulemaking to ban restrictive noncompete clauses.

“Workers, honest businesses, and entrepreneurs across America overwhelmingly support the FTC’s decision to ban noncompete agreements,” says Katie Van Dyck, Senior Legal Counsel at the American Economic Liberties Project. “A plain reading of the FTC Act and Supreme Court precedent reveals a clear authority for the agency to designate anticompetitive practices, like noncompetes, as unfair methods of competition. We applaud the FTC for using their congressional authorization to free millions of workers from the shackles of these restrictive agreements and level the playing field for fair competition in the labor market.”

The FTC’s decision to designate non-compete clauses as unfair methods of competition has been met with widespread support from the American public, with the exception of the Chamber of Commerce and its members. These groups have used legal arguments like the “major questions” doctrine, the non-delegation doctrine, due process, and principles of federalism to justify dismantling the FTC’s rulemaking authority, but as Economic Liberties’ written comments rigorously demonstrate, each of these falls flat when faced with a plain reading of the FTC Act and Supreme Court precedent.

Noncompete agreements limit where employees can work after their tenure at a company ends, and they are widely abused. Evidence suggests at least 18% of the workforce are subject to noncompete agreements upon signing a job offer. As President Biden has noted, “these aren’t just high-paid executives or scientists who hold secret formulas for Coca-Cola so Pepsi can’t get their hands on it…They’re construction workers, hotel workers, disproportionately women and women of color.”

Noncompetes have been shown to restrict wages and dampen entrepreneurship, reducing new-firm entry by as much as 18 percent. In fact, workers in states and industries with more noncompetes suffer from lower wages, less job mobility, and lower levels of job satisfaction, even when they themselves aren’t bound by such agreements. In July 2021, as part of his Executive Order on Promoting Competition in the American Economy, President Biden encouraged the FTC to curtail the use of noncompete agreements. Chair Lina Khan explained why she hoped to do so last year, noting the agency felt “an enormous amount of urgency given how much harm is happening against the workers.”

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