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Alabama Law for You

  • Writer's pictureGregory Stanley

FTC (non) Competes with the US Constitution

All non-compete agreements in the United States were banned on Tuesday by three unelected government employees.  Three of the five Oligarchs at the US Federal Trade Commission claim that this preposterous rule affects all sectors of the economy[1].   That means that the FTC, which has no constitutional or statutory authority to make such a rule and has never in its 100 years had authority to make such a rule, considers its rule supreme over state laws, the Constitution, and the US Congress.

Non-compete agreement?

A non-compete agreement is an agreement whereby employees agree not to quit and go work for their employer’s competition after working just long enough to be trained and learn a company’s processes.  The FTC estimates that banning noncompete agreements could create jobs for 30 million Americans and raise wages by nearly $300 billion per year. (Watch for my next article on the FTC voiding all US trademarks, copyrights, and patents because the FTC estimates it will end global warming and cause peace in the Middle East.)

Ex post facto?

The FTC’s new rule doesn’t just ban enforcement of non-competes, it tries to make it illegal to include the agreements in contracts.  So just having such an agreement could result in the full weight of the Federal Trade Commission's winged monkeys coming down on the owner of your favorite coffee bar. 

The FTC hubris just doesn’t stop:  They claim their new rule retroactively voids existing employment agreements and requires companies with legal noncompete agreements to inform workers that they are now void.  (Sounds like the FTC just created a lot of business…for contracts attorneys.)

The new Rule violates, well, everything

The FTC’s public webpage says they “… enforce a variety of antitrust and consumer protection laws.”  The FTC’s webpage doesn’t mention making their own laws restricting individual contract rights, so they violated their own mission statement. Which begs the question:  If the FTC will now make laws instead of enforcing them, what will Congress do? Will the FTC replace the State legislatures as well? And who will enforce this new FTC-made law?  I don’t think it will be courts in states that didn’t want such a law in the first place. 

I heard in law school that any non-compete must be limited in geography and time in order to be enforceable: Non-competes must be local to be enforceable and that may be why they are governed exclusively by state law. 

Non-compete agreements are well established and well regulated by the state and county courts.  You could say that the State legislatures occupy the field of non-compete law and there is no room for 5 unelected monkey kings to create and enforce laws that contradict 200 years of the 10th Amendment. 

Why should you care?

Did I mention the FTC's winged monkeys and that the FTC kingpins claim this affects all sectors of the economy? Seriously, watch for Constitutional challenges within the next 90 days before this thing is supposed to go into effect.

The Commerce Clause deserves a shout-out here as well, but alas, my space is up.

[1] Despite the PR from the FTC, they actually have no authority concerning banks, insurance companies, non-profits, transportation and communications common carriers, air carriers, and some other entities.

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