FTC Turns Up the Heat on Non-Competes and Information Sharing
December 18, 2021
Noting that in their view, “recent patterns of conduct” and declining levels of competition have caused competitive harm to workers, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) hosted a two-day virtual workshop to discuss competition issues in the labor market and plans to execute President Biden’s Executive Order "Promoting Competition in the American Economy".
Among many topics, two stood out: calls to ban or severely limit the use of non-competes and warnings regarding the use of information sharing and benchmarking among employers.
Limiting Non-Competes. FTC representatives, lawyers and academics (but to our dismay, no companies) discussed their views that non-compete, nondisclosure, non-solicitation and training repayment agreements may harm the labor force with regards to worker mobility, wages, and entrepreneurship. There was also discussion as to the procompetitive aspects of non-compete agreements, such as protecting the knowledge, proprietary information, inventions, and innovation of employers. However, the overall tone of the panels was concerning in its attitude toward the use of non-competes and non-disclosure agreements generally, as the FTC has already stated that it plans to generate new regulation on this topic.
Earlier this year, the President’s Executive Order specially encouraged the FTC to curtail the use of non-compete agreements. To date, there has been no rulemaking on this topic, but a proposed rule could come from the agency soon. In the meantime, the Center submitted a comment letter to the FTC recommending against a “one size fits all” ban on non-compete agreements. The letter reiterated several points made in our February 2020 letter when the FTC last solicited comments on the subject.
Limiting Information Sharing. Panelists focused on anti-trust concerns, harms and benefits to information sharing among employers, and then considered alternatives to both the legal standards that apply to information exchanges and the guidance that the agencies have provided to date. Most concerning were statements that information sharing (such as salary surveys) should only be allowable if information is shared publicly with all employees, and calls to eliminate the safe harbors that companies currently rely on (such as that benchmarking must be collected by a third party anonymously and without forward-looking information).