ABA, Trades Urge Federal Trade Commission to Delay Implementation of Noncompete Ban

Dear Commissioners:

On behalf of the undersigned organizations, we request that the Commission stay the effective date of the Non-Compete Clause Final Rule (89 Fed. Reg. 38,342-38,506, "Noncompete Rule") to allow for judicial review.

Under Section 705 of the Administrative Procedure Act, agencies "may postpone the effective date of action taken by it, pending judicial review" when justice so requires." We strongly encourage you to exercise this power on the Noncompete Rule as FTC and other agencies recently have on other rulemakings. The Commission already elected to stay its CARS Rule pending litigation. Similarly, the Securities and Exchange Commission acted to stay its Climate Disclosure Rule, and the National Labor Relations Board delayed the effective date of the Joint Employer Rule.

A stay would be a prudent step. The impending effective date of the Noncompete Rule and lack of Commission guidance on key pieces of it – such as what it means to be in a policy-making position or how the Commission will apply its "functional" test – has creating substantial uncertainty for businesses and employees around the country. In delaying the CARS Rule, the Commission cited "misunderstandings of the Rule" and the "uncertainty" that resulted as a reason for delay. A brief, voluntary delay would provide invaluable certainty as to the Rule's potential effective date and conserve significant resources.

Although the Noncompete Rule's legal fate remains in question, it is already imposing significant costs and uncertainty on the U.S. economy. Businesses are identifying existing noncompetes and notifying employees and former employees that their noncompetes may no longer be enforceable. Companies are incurring substantial legal costs as they explore other tools to attempt to protect their investments, and workers are losing training opportunities and bargaining power to negotiate compensation.

Download the joint comment letter to read the full text.