US Chamber of Commerce to sue FTC over ban on noncompetes

🌈 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.

🙋 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.