The PA Chamber joined chambers of commerce and business organizations nationwide last week in sending a letter to the Federal Trade Commission in opposition to a proposed Noncompete Rule. “We strongly oppose the proposal because noncompetes serve vital business and employee interests and because the FTC lacks legal authority to issue the proposed rule,” they wrote.
The letter laid out several ways that noncompetes help the economy by encouraging investment in employees, helping to protect trade secrets and structuring compensation programs. Additionally, they are often preferable to trade-secret laws or nondisclosure agreements, which typically require employers to meet an unrealistically high bar of proving misappropriation of trade secrets in order to secure an injunction. Noncompetes are also essential to the sale of a business – something that the proposed rule would also ban.
The letter also makes the case that the FTC lacks the authority to issue the rule are specifically not authorized to define unfair methods of competition. “In contrast, Congress has repeatedly granted the FTC the authority to promulgate substantive rules on ‘unfair or deceptive acts and practices’ and other discrete topics, but has declined to authorize regulations addressing unfair methods of competition,” the signatories stated. They added that the FTC cannot promulgate the rule without express authorization from Congress; that the rule runs afoul of the nondelegation doctrine; and that it violates bedrock principles of federalism as it would “disrupt areas of traditional state regulation.”
“While there are many ways for this proposal to be narrowed, because the FTC lacks the authority to issue any regulation on this issue, it should withdraw its proposed rule, and revert to the authority granted to it by Congress to address questions of unfair methods of competition through its adjudicative function,” the coalition concluded.
The full letter is available here.