Coalition Urges FTC to Ban Employer Non-Compete Clauses, Which 'Keep Workers Stuck'

A coalition of 25 progressive advocacy groups sent a letter Wednesday urging the Federal Trade Commission to immediately begin working on a rule to prohibit the use of non-compete clauses in employment contracts, arguing that such agreements disempower tens of millions of workers.

"Employers' use of non-compete clauses inflict real and substantial harms on the American worker and the overall U.S. economy without any legitimate justification," states the letter to the FTC. "By limiting workers' mobility, non-competes drive down wages, reduce the formation of new businesses, and keep workers stuck in unsafe or hostile workplaces."

"These one-sided contracts can also unfairly restrain competition in downstream markets by allowing dominant firms to hold on to specialized workers--think of monopolistic hospitals and surgeons," the groups wrote. "Instead of retaining workers through coercive non-compete clauses, employers should maintain a loyal workforce by offering good wages, regular raises and promotions, and fair treatment."

The coalition, which includes Public Citizen, AFL-CIO, and the National Employment Law Project, continued:

The FTC has made clear it is contemplating action, but time is running short. It is vital that the FTC begin the rulemaking process to signal to the public, courts, and corporate America that it is committed to fair competition in the labor market. Additionally, further delay in issuing an NPRM [notice of proposed rulemaking] may result in legal jeopardy. An NPRM is only the first step toward prohibiting non-compete clauses--reviewing and responding to comments and developing the final rule will take significant time. Lawmakers have historically depended on the Congressional Review Act to overturn agency actions with which they disagree. Should there be unified control of Congress and the White House following the 2024 election, any agency action completed in the second half of 2024 will be open to repeal.

The country is in the midst of a widespread re-empowerment of labor, [and] the Biden administration has made clear that reviving employer competition for workers' services is a key plank of its policy program. We cannot waste a historic opportunity to use federal authority to eliminate pernicious non-compete clauses. We call on the FTC to begin its important work by issuing a strong rule proposal now.

"President [Joe] Biden made clear in his executive order on competition that federal action on non-competes was a part of his administration's approach to keep labor markets fair and open," Matt Kent, competition policy advocate at Public Citizen and author of the letter, said in a statement, referring to a July 2021 directive from the White House.

"The FTC must follow through and start the process. Banning this pervasive anti-worker practice is urgent and will only become more challenging as we approach the uncertainty of the 2024 election cycle," he added. "It would be a tragedy for FTC to waste the moment. The time to issue a proposed rule is now."