The Federal Trade Commission announced yesterday that it is extending the comment period related to proposed rule on non-compete clauses, likely because of the expected number of comments that are to be filed.
The agency announced in January that it was proposed a rule banning the use of non-compete clauses in employment contracts. The original comment period was due to end on March 20. The comment period will now close on April 19. The FTC was asked to extend the comment period by 60 days, but opted for a 30-day extension instead. In a statement, Commissioner Christine Wilson said she supported the 60-day extension because the proposal “is a departure from hundreds of years of precedent and would prohibit conduct that 47 states allow.”
To date, there have been more than 16,000 comments filed. Interested parties can submit their comments by clicking here.
Non-compete clauses suppress wages, hamper innovation, and block entrepreneurs from starting new businesses, the FTC argues, and getting rid of them could increase wages by as much as $300 billion per year.
Under the proposed rule, a non-compete clause would become an unfair method of competition and would apply not just to new non-compete clauses, but existing ones as well. There would be a carved-out limited exception for non-compete clauses between the buyer and seller of a business, provided that the person restricted by the non-compete clause owns at least 25% of the business.
One report, published today, accused the FTC of using “inconclusive” research to conclude that non-compete clauses reduce employees’ earnings. “The FTC’s conjecture that the rule will increase earnings is based on inappropriate extrapolations from six cited studies that correlate NCC enforceability and pay,” according to the report. “A problem common to all the cited research is the inability to adequately measure employees’ skills and relevant prior work experience. More experienced workers receive higher pay, so higher earnings in these studies may be greater skills and experience and not increased competition.”