Advocates take aim at Congress members who say they’ll fight FTC ban on noncompete clauses

Just after New Year’s Day the Federal Trade Commission said it was moving to block employers from restricting where ex-employees can go to work.

Noncompete clauses — contract provisions that forbid a worker who leaves a job from working for a competing employer or starting a competing business, usually in a specific geographic area — hold down wages and thwart competition, the agency stated when it announced a new proposed rule to block future noncompete agreements and dissolve agreements already in effect. 

“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said FTC Chair Lina M. Khan in the Jan. 5 announcement. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”

On Valentine’s Day, four Republican members of the U.S. House Judiciary Committee, including U.S. Rep. Scott Fitzgerald (R-Juneau), wrote to Khan vowing to fight the proposed rule and calling it a “power grab” overriding the role of states as arbiters of legal contracts. The rule is  emblematic of the Biden administration’s “eagerness to centrally plan the American economy to meet a preferred social agenda,” the letter declares.

Last week, all four were targeted by an advocacy group, Fight Corporate Monopolies. The organization ran TV ads targeting Fitzgerald in the Milwaukee media market and dispatched a van with an electronic billboard criticizing the congressman to cruise high-traffic thoroughfares in the 5th District.

The goal is to publicize Fitzgerald’s opposition to the proposed rule, which the FTC has calculated could raise wages by $300 billion per year and narrow race and gender  wage gaps.

“It’s not something he’s going around and bragging about, so this is something we want to make sure his constituents know that he’s doing behind the scenes,” said Helen Brosnan, executive director of Fight Corporate Monopolies. 

The proposed FTC rule “benefits workers of all kinds, and also small businesses and people who want to start small businesses,” she added.

Fitzgerald’s office did not respond to email inquiries from the Wisconsin Examiner sent Friday and again on Tuesday.

The letter bearing his signature along with those of House Judiciary Chair Jim Jordan (R-Ohio) and those of Reps. Darrell Issa (R-Calif.) and Thomas Massie (R-Ky.) declares that the proposed rule “exceeds its delegated authority and imposes a top-down, one-size-fits-all approach that violates basic American principles of federalism and free markets.”

The letter claims that the FTC lacks the authority under federal law to undertake such a proposed rule.  

In issuing the rule, the agency stated that since noncompete clauses “limit competition by their express terms,” they “have always been considered proper subjects for scrutiny under the nation’s antitrust laws.” 

The proposed rule cites language in the 1914 FTC Act that created the agency, outlawed “unfair methods of competition” and authorized the commission to “make rules and regulations for purpose of carrying out” its duties, including enforcing the law against unfair competition. 

The day that the FTC announced the rule, Heidi Shierholz, president of the Economic Policy Institute, celebrated on Twitter. The EPI analyzes economic issues and workplace conditions from the perspective of workers.

“The only source of power nonunionized workers have vis-à-vis their employers is their ability to quit and take a job elsewhere. So, SURPRISE, employers are using noncompete agreements to cut that source of worker power off at [the] knees,” she tweeted. 

Since the proposed rule was published more than two months ago, the FTC has received more than 370,000 comments from the public and has posted more than 9,200. 

The posted comments show that contracts that forbid workers who leave their employer from competing in the same business or geographic area crop up in a variety of professions and jobs. 

Health care professionals, including doctors but also some nurses and other health care workers, have been required to sign agreements by the hospitals, clinics or medical groups they work for prohibiting them from going to work for competing organizations, for example.

The FTC says noncompete clauses affect as many as 30 million employees nationally, about 1 in 5 workers, and that they are not found only in highly paid professions. 

Retail employees, security guards, nail and hair salon employees are just some of the other workers who are trapped by contracts that forbid them from working for competitors if they leave, Brosnan said. 

“This is affecting workers across industries, across incomes — workers who frankly have less bargaining power than their employers,” she said. The restrictions “coerce them into staying in jobs they’d rather leave or need to leave.”

Some employers have defended noncompete agreements as a way to protect trade secrets that a former employee might take to a competitor, but other laws that directly relate to trade secrets can be used to address that instead, she added.

In addition to advertising that targeted Fitzgerald in his Wisconsin district, Fight Corporate Monopolies put out critical billboards and TV spots last week in the districts of the other three members of Congress who signed the Judiciary Committee letter, said Brosnan. The organization says it’s considering future actions targeting each as well. 

Fight Corporate Monopolies is the political arm of the American Economic Liberties Project. “We are an advocacy organization that works on taking on concentrated corporate power,” Brosnan said, adding that banning noncompete agreements helps promote economic liberty for small businesses and workers at all levels.

Noncompete clauses are already unenforceable under state laws in California, Oklahoma and North Dakota, she said. Nevertheless, industries that have been relying on them elsewhere “still very much flourish” in those states.