Request to Stay Implementation of FTC Rule That Prohibits Most Non-Compete Clauses

May 24, 2024

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The Honorable Lina Khan
Chair
Federal Trade Commission
Washington, DC 20580

The Honorable Melissa Holyoak
Commissioner
Federal Trade Commission
Washington, DC 20580

The Honorable Rebecca Kelly Slaughter
Commissioner
Federal Trade Commission
Washington, DC 20580

The Honorable Andrew N. Ferguson
Commissioner
Federal Trade Commission
Washington, DC 20580

The Honorable Alvaro Bedoya
Commissioner
Federal Trade Commission
Washington, DC 20580

Re: Request to Stay and Delay Implementation of the Noncompete Rule

Dear Commissioners:

On behalf of the undersigned organizations, we request that the Commission stay the effective date of the Non-Compete Clause Final Rule (89 Fed. Reg. 38,342-38,506, “Noncompete Rule”) to allow for judicial review.

Under Section 705 of the Administrative Procedure Act, agencies “may postpone the effective date of action taken by it, pending judicial review” when “justice so requires.” We strongly encourage you to exercise this power on the Noncompete Rule as FTC and other agencies recently have on other rulemakings. The Commission already elected to stay its CARS Rule pending litigation.[1]Similarly, the Securities and Exchange Commission acted to stay its Climate Disclosure Rule,[2]and the National Labor Relations Board delayed the effective date of the Joint Employer Rule.[3]

A stay would be a prudent step. The impending effective date of the Noncompete Rule and lack of Commission guidance on key pieces of it – such as what it means to be in a policy-making position or how the Commission will apply its “functional” test – has creating substantial uncertainty for businesses and employees around the country. In delaying the CARS Rule, the Commission cited “misunderstandings of the Rule” and the “uncertainty” that resulted as a reason for delay.[4] A brief, voluntary delay would provide invaluable certainty as to the Rule’s potential effective date and conserve significant resources.

Although the Noncompete Rule’s legal fate remains in question, it is already imposing significant costs and uncertainty on the U.S. economy. Businesses are identifying existing noncompetes and notifying employees and former employees that their noncompetes may no longer be enforceable. Companies are incurring substantial legal costs as they explore other tools to attempt to protect their investments, and workers are losing training opportunities and bargaining power to negotiate compensation.

Noncompete agreements have been enforceable since before the country’s founding. A short implementation delay of a few months should impose no meaningful costs, and certainly no unexpected costs, on anyone. If the Commission ultimately succeeds in court, only a small number of noncompetes for policy-making senior employees entered into between September 4, 2024 and the final effective date would be impacted given the rule’s retroactivity requirements.

Finally, a brief delay would comport with the Commission’s mission of enforcing federal law in a cost-effective manner. As set forth in the Commission’s current strategic plan, the Commission “strives to efficiently address the competitive concerns raised by a merger or business practice and works toward a solution that maintains competition in the marketplace without unduly burdening legitimate business activity.” In keeping with this goal, a brief delay would provide invaluable certainty to the business community and, if the Rule ultimately is enjoined, potentially conserve significant resources around the country.

We thank you for your consideration of this request.

Sincerely,

National
ACA International
Advanced Medical Technology Association
Alternative Investment Management Association
American Bankers Association
American Coatings Association
American Council of Engineering Companies
American Foundry Society
American Hospital Association
American Hotel & Lodging Association
American Property Casualty Insurance Association
American Staffing Association
American Trucking Association
Associated Builders and Contractors
Associated Equipment Distributors
Associated General Contractors of America
Business Roundtable
Consumer Technology Association
Direct Selling Association
Federation of American Hospitals
FIA Principal Traders Group
FMI – The Food Industry Association
Foodservice Equipment Distributors Association
Futures Industry Association
HR Policy Association
Independent Electrical Contractors
Independent Insurance Agents & Brokers of America
Independent Lubricant Manufacturers Association
International Agribusiness Council
International Franchise Association
Investment Adviser Association
Meat Institute
MEMA, The Vehicle Suppliers Association
Metals Service Center Institute
MFA, Managed Funds Association
National Association of Business and Insurance Professionals
National Association of Convenience Stores
National Association of Manufacturers
National Association of Mutual Insurance Companies
National Association of Wholesaler-Distributors
National Automobile Dealers Association
National Federation of Independent Business
National Lumber & Building Material Dealers Association
National Mining Association
National Newspaper Association
National Pest Management Association
National Propane Gas Association
National Restaurant Association
National Tooling and Machining Association
National Waste & Recycling Association
NCTA – The Internet & Television Association
Precision Machined Products Association
Precision Metalforming Association
Reinsurance Association of America
Retail Industry Leaders Association
Securities Industry and Financial Markets Association
The Council of Insurance Agents and Brokers
U.S. Chamber of Commerce
U.S. Council for International Business
USTelecom – The Broadband Association
Wholesale & Specialty Insurance Association

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[1] Order Postponing Effective Date of Final Rule Pending Judicial Review, Federal Trade Commission, January 18, 2024, https://www.ftc.gov/system/files/ftc_gov/pdf/P204800CARSExtensionOrder.pdf.

[2] Order Issuing Stay, Securities and Exchange Commission, April 4, 2024, https://www.sec.gov/files/rules/other/2024/33-11280.pdf.

[3] Board Extends Effective Date of Joint-Employer Rule to February 26, 2024, National Labor Relations Board, November 16, 2023, https://www.nlrb.gov/news-outreach/news-story/board-extends-effective-date-of-joint-employer-rule-to-february-26-2024.

[4] Order Postponing Effective Date of Final Rule Pending Judicial Review, Federal Trade Commission, January 18, 2024, https://www.ftc.gov/system/files/ftc_gov/pdf/P204800CARSExtensionOrder.pdf.