March 7, 2023 10:17am
GLI opposes FTC rule to ban non-compete agreements
GLI joined a coalition led by the U.S. Chamber in opposing the proposed Federal Trade Commission (FTC) rule that would ban almost all employer non-compete agreements across the country. This sweeping proposal represents a stark change in regulation for non-competes, which would overturn well-established state laws governing their use.
What are non-competes?
Non-competes are a standard business practice used by employers for a myriad of reasonable and beneficial purposes to foster innovation and preserve competition in business, including:
- To protect intellectual property and trade secrets
- To prevent non-solicitation of their customers
- To reward senior executives with equity in the business, particularly in the case of start-ups and small businesses
- As part of complex compensation plans to ensure that things like stock plans, bonuses, and training costs are repaid if an employee departs for a competitor within a certain amount of time.
How would this proposed ban affect businesses?
While the FTC states that non-competes suppress wages and hamper innovation, these types of agreements between employers and employees are typically only used for the top 1% – 10% of wage earners in companies. Rather than raise wages, a blanket ban would force companies to re-think their compensation and talent attraction strategies in ways that could reduce what companies are willing to pay for top talent and would have a chilling effect on incentives to pay bonuses, award equity, pay severances, and invest in skills and educational training for employees. Moreover, implementing this rule would also invalidate millions of contracts around are beneficial for both businesses and employees.
What is GLI doing?
GLI is working with a national coalition led by the U.S. Chamber and comprised of more than 100 organizations and trade associations that have expressed serious concerns over this proposed rule. The coalition sent a letter to Congress encouraging lawmakers to exercise their authority and rein in the FTC’s unauthorized rulemaking banning non-compete agreements. Read the letter here.
Further, GLI is in contact with the Kentucky and Indiana federal delegations to reiterate the concerns of the Greater Louisville business community and will be submitting a comment letter to the FTC in opposition of the rule.