US Chamber of Commerce urges delay on new federal non-compete rule

The future of non-compete rules: ©Taurus: stock.adobe.com

The U.S. Chamber of Commerce, along with several other business and health care organizations, has formally requested that the Federal Trade Commission delay the implementation of the recently finalized Non-Compete Clause Rule.

The request comes amid growing concerns about the rule’s implications for businesses and employees nationwide, and the issue is pertinent for physicians. Some physicians have spoken in favor of a ban, arguing the noncompetes restrict their ability to change jobs while remaining in or near one geographical location. For example, The American Academy of Family Physicians last year argued against noncompetes, arguing they stifle competition, hurt patients’ access to care, and limit physicians’ ability to choose their employer.

In a letter addressed to the FTC commissioners, the Chamber of Commerce emphasized the need for a stay on the rule’s effective date to allow for judicial review. The Non-Compete Clause Final Rule aims to restrict the use of non-compete agreements that prevent employees from working for competitors or starting similar businesses for a specified period after leaving a job.

Citing Section 705 of the Administrative Procedure Act, the Chamber pointed out that agencies have the authority to postpone the effective date of their actions pending judicial review when “justice so requires.” This provision has been used by various agencies recently, including the FTC itself, which delayed the implementation of its CARS Rule due to misunderstandings and uncertainties surrounding the rule.

“The impending effective date of the Noncompete Rule and the lack of Commission guidance on key pieces of it – such as what it means to be in a policymaking position or how the Commission will apply its ‘functional’ test – has created substantial uncertainty for businesses and employees around the country,” the letter states.

The Chamber also highlighted the significant costs and uncertainties the rule is already imposing on the economy. Businesses are reviewing and potentially nullifying existing non-compete agreements, incurring legal costs, and exploring alternative methods to protect their investments. Furthermore, the Chamber claims workers are losing training opportunities and bargaining power regarding compensation due to the anticipated changes.

Non-compete agreements have a long history in the United States, with enforceability dating back to before the country’s founding. The Chamber argues that a brief delay in the rule’s implementation would not impose any significant or unexpected costs on businesses or employees. If the rule is ultimately upheld in court, only a small number of non-competes for senior policy-making employees entered into during the delay period would be affected.

The Chamber’s letter underscores the importance of the FTC’s mission to enforce federal law in a cost-effective manner, noting that a brief delay would align with this goal by providing greater certainty to the business community and potentially conserving resources.

Supporters of the rule argue that it will enhance labor market mobility and competition, while opponents, including the Chamber of Commerce, warn that it could disrupt business operations and economic stability.