US Chamber of Commerce to sue FTC over ban on noncompetes
๐ Abstract
The article discusses the U.S. Chamber of Commerce's plan to sue the Federal Trade Commission (FTC) for banning non-compete clauses in most employment contracts across America. The FTC has determined that non-compete agreements are an "unfair method of competition" and a violation of the FTC Act. However, the rule will still allow non-compete clauses for senior executives earning over $151,164 annually. The article also discusses past debates around non-compete agreements, including allegations of anti-competitive practices by tech companies like Apple.
๐ Q&A
[01] The FTC's Ban on Non-Compete Clauses
1. What are the key points of the FTC's final rule banning non-compete clauses?
- The FTC has officially banned non-compete clauses in employment contracts across America, with some exceptions.
- The ban aims to help create 8,500 extra new businesses and 17,000-29,000 more patents each year.
- The rule still allows non-compete clauses for "senior executives" earning over $151,164 annually in "policy-making positions".
- The FTC believes this subset of workers is less likely to be subject to the "acute, ongoing harms" suffered by other workers under non-compete agreements.
2. What are the main arguments made by the U.S. Chamber of Commerce against the FTC's rule?
- The Chamber of Commerce has labeled the FTC's action as an "unlawful power grab", arguing that the matter should be confined to state law.
- The Chamber's CEO claims that "three unelected commissioners have unilaterally decided they have the authority to declare what's a legitimate business decision and what's not by moving to ban noncompete agreements in all sectors of the economy."
3. What are some past examples of alleged anti-competitive practices related to non-compete agreements?
- In 2013, Apple CEO Steve Jobs was alleged to have threatened the CEO of Palm with a patent lawsuit if he didn't stop hiring Apple employees.
- In a recent case, the startup Rivos accused Apple of using the Defend Trade Secrets Act to "improperly obstruct employee mobility" by forcing employees to sign contracts with non-compete provisions that violate California law.
[02] Debates Around Non-Compete Agreements
1. How have non-compete agreements been viewed in different jurisdictions?
- Non-compete agreements are typically deemed illegal under the California Business and Professions Code.
- However, there have been allegations of more complex anti-competitive practices beyond just contractual non-compete clauses.
2. What was the case involving Evan Brown and Alcatel regarding intellectual property rights?
- Evan Brown lost a case against Alcatel in 2002, with a judge ruling that the company owned the rights to a software idea that existed entirely in Brown's thoughts.
- The court ordered Brown to disclose his "Solution", but Alcatel's counsel admitted it was "woefully incomplete and inadequate", making it ineligible for patent protection.
- Brown testified that it would take an "extraordinary skill" to reduce the Solution to a working computer program, and a programmer of ordinary skill would have "virtually no chance" of success without extensive experimentation.
3. How did the FTC vote on the rule to abolish non-compete agreements?
- The FTC vote to abolish non-compete agreements was passed 3:2, with Democrats supporting the ban and Republicans opposing.