Join Kelley Drye in a discussion to explore how the FTC’s proposed ban may impact your company and get practical tips on how employers can prepare for a world with endangered noncompetes.
We will cover the following topics:
The FTC’s Proposal to Ban Noncompetes is on Shaky Legal Ground
By now, most of our readers have likely heard about the FTC’s proposed rule to ban noncompete clauses in employment contracts, including from Kelley Drye’s other posts on the topic discussing the sheer breadth of the proposal and the potential implications for employers. In this post, we zero in on an issue that merits a lot more attention than it’s getting – namely, the serious legal and practical questions that the FTC’s proposal raises.
Brief recap of how we got here and what the rule would require
This is the first of many rulemakings that the FTC has said it will launch based on its supposed authority to issue rules banning “unfair methods of competition” (“UMCs”) under the FTC Act. Notably, starting with a statement of regulatory priorities submitted to OMB in December 2021, the FTC has said repeatedly that it may launch multiple competition rulemakings based on this authority (as well as multiple consumer protection rulemakings based on its Magnuson-Moss authority, which it has done). More recently, the FTC issued a policy statement taking an expansive view of what’s an UMC, so the scope of the FTC’s intended reach here could be very broad indeed.
Continue Reading The FTC’s Proposal to Ban Noncompetes is on Shaky Legal Ground
FTC Proposed Ban of Noncompetes: Practical Guidance For Employers
The Federal Trade Commission’s (“FTC”) proposed rule banning the use of non-competes with employees and workers could regulate nearly every employer in the nation. If a final rule emerges from this proposal it could potentially prohibit non-disclosure, non-solicitation, and non-recruitment agreements and functional non-compete clauses. How can individual firms and industry groups alike weigh in on one of
FTC Proposes to Regulate Virtually Every Labor Relationship in the United States
Last week, the Federal Trade Commission revealed what it meant when it vowed to be more than an antitrust and consumer protection agency. It announced a proposal to regulate virtually every labor and service relationship in the United States and make it more lucrative for people to quit.
The new rule is predicted to boost wages and salaries for millions of Americans at every income level, with CEOs getting some of the largest raises. According to the FTC’s analysis, the rule is likely to reduce on-the-job training, shorten job tenure, and generate more resignations. It might also spur litigation if employees spill trade secrets in their new posts.
In measures both simple and sweeping, the rule would ban certain terms of service and regulate others. Categorically banned would be non-compete clauses (or NCCs) in agreements between companies and workers or contractors. Any agreement that prevents a person from quitting a job and working for a competitor or starting a competing business would be illegal, no matter how important it might be to protect trade secrets and competitive strategies of the employer.
Potentially prohibited would be non-disclosure, non-solicitation, and non-recruitment agreements. These would be deemed functional NCCs if they effectively preclude someone from quitting a job and joining a competitor. Agreements requiring workers to pay employers for training would also be deemed functional NCCs if the payments not reasonably related to the cost of the training prevent workers from quitting.
Continue Reading FTC Proposes to Regulate Virtually Every Labor Relationship in the United States
Rep. Bilirakis Quotes Kelley Drye’s Ad Law Access at House Energy & Commerce Committee Hearing: Critique of FTC Strategy Now on the Record
On September 21, Rep. Gus Bilirakis, R-Fla., cited the Kelley Drye article “The Deletion of ‘Legitimate Business Activity’ from the FTC’s Strategic Plan” during a House Energy & Commerce Committee hearing before entering it into the record. From the transcript:
*Mr. Bilirakis.
For years, the FTC has been tasked with the critical
Update: Chair Cantwell Introduces S. 4145, A One-Sided 13(b) Fix
On Wednesday, we described draft legislation circulating in the Senate Commerce Committee that would have given the Federal Trade Commission almost unfettered authority to enjoin permanently any act, practice or method of competition that did not meet its approval. https://www.adlawaccess.com/2022/05/articles/senate-commerce-committee-chair-pushes-one-sided-13b-fix/ All the Commission would need to do is show that a reasonable person had fair
Senate Commerce Committee Chair Pushes One-Sided 13(b) Fix
The one-year anniversary of the Supreme Court’s decision in AMG Capital Management, LLC v. FTC has renewed calls for Congressional action to expand and codify the Federal Trade Commission’s enforcement authority under Section 13(b) of the FTC Act. Last Thursday, we wrote here about the agency’s most recent open meeting, during which Commissioners heard from a key Senate staffer that Senate Commerce Committee Chair Maria Cantwell (D-WA) intended to introduce what she hoped would be a bipartisan fix. Yesterday, Chair Cantwell’s bill was made public, and its terms render any hope of bipartisan support a long-shot, at best, with little likelihood of garnering the Republican support needed to clear the chamber.
The bill’s release followed the May 2 release of a Senate Commerce Committee report entitled Restoring the Federal Trade Commission’s Authority to Protect Consumers and the Marketplace – an 80-page report, more than 50 pages of which purported to list dollar amounts received in each state due to “FTC cases resulting in significant refunds” (many of which were settlements never actually litigated under Section 13(b)). The report echoed much of what we heard from Commissioners last week – that AMG has created an enforcement void for the agency and no alternative enforcement approaches come close to 13(b)’s ability to protect consumers and provide monetary redress. The report couched the court’s decision as particularly damaging to the agency’s efforts to curtail “Big Tech and Pharma’s ability to harm consumers and fledgling businesses.”
Continue Reading Senate Commerce Committee Chair Pushes One-Sided 13(b) Fix
The Deletion of “Legitimate Business Activity” from the FTC’s Strategic Plan
For decades, the FTC has explained that the omission of information can lead to liability. It is also a canon of statutory construction that an amendment helps reveal legislative intent. And of course, your mother put it simply: words that you say (and take back) have meaning.
Earlier this month, the Commission released its draft
Commissioner Christine Wilson Excoriates The FTC Chair’s Agenda in ABA Fall Forum Speech
Last week. FTC Commissioner Christine Wilson delivered a speech with a title that made clear she intended to speak her mind: The Neo-Brandeisian Revolution: Unforced Errors and the Dimunition of the FTC.
Predicting that the new FTC Leadership will fall far short of achieving its objectives — most of which she opposes — Commissioner Wilson
Next Up – Earnings Claims: Notice of Penalty Offenses Sent to 1,100 Direct Selling Companies and Others in the Gig Economy
In its third recent Penalty Offense Authority notice, the FTC today notified more than 1,100 companies offering “money-making opportunities” that it intends to pursue civil penalties of up to $43,792 per violation for misrepresentations related to potential earnings and related characteristics about the opportunity. Recipients of the notice include virtually every major direct selling company and others in the gig economy such as Amazon, DoorDash, Lyft, and Uber.
That makes more than 1,800 companies that have been put on notice of penalty offenses in the past month. It also crosses another alleged deceptive practice off the list laid out in the October 2020 paper authored by current Bureau Director Sam Levine and former FTC Commissioner Rohit Chopra, entitled The Case for Resurrecting the FTC Act’s Penalty Offense Authority. Next up? Well, if the Chopra/Levine paper points the way (and it appears to), we should expect future notices that focus on allegedly unfair and deceptive data harvesting and targeted marketing.
In addition to the eight categories of misrepresentations in today’s notice ranging from the amount of earnings possible to the amount of training provided, the sample cover letter published online also includes a section on endorsements and testimonials. This means that each company receiving today’s notice also will receive the notice published last week on endorsements and testimonials, which over 700 companies also received (with some minimal overlap in that list).
Continue Reading Next Up – Earnings Claims: Notice of Penalty Offenses Sent to 1,100 Direct Selling Companies and Others in the Gig Economy