The FTC Seemingly Thumbs Its Nostril on the Supreme Courtroom

Regardless of the Supreme Courtroom’s latest 6-3 ruling in West Virginia v. EPA that regulatory companies should have “clear congressional authorization” to make guidelines pertaining to “main questions” which are of “nice political significance” and would have an effect on “a good portion of the American financial system,” and the import of that ruling to the realm of noncompete regulation (which we addressed intimately in Law360), the Federal Commerce Fee (FTC) and Nationwide Labor Relations Board (NLRB) introduced yesterday that they’re teaming as much as tackle sure points affecting the labor market, together with the regulation of noncompetes.

In a Memorandum of Understanding (MOU) issued on July 19, 2022, the FTC and NRLB shared their shared view that:

continued and enhanced coordination and cooperation regarding problems with widespread regulatory curiosity will assist to guard employees towards unfair strategies of competitors, unfair or misleading acts or practices, and unfair labor practices. Problems with widespread regulatory curiosity embody labor market developments referring to the “gig financial system” and different various work preparations; claims and disclosures about earnings and prices related to gig and different work; the imposition of one-sided and restrictive contract provisions, equivalent to noncompete and nondisclosure provisions; the extent and affect of labor market focus; the affect of algorithmic resolution making on employees; the power of employees to behave collectively; and the classification and therapy of employees. (Emphasis added.)

Accordingly, the aim of the MOU is “to facilitate (a) info sharing and cross-agency consultations on an advert hoc foundation for official legislation enforcement functions, in a way according to and permitted by the legal guidelines and laws that govern the [FTC and NLRB](b) cross-agency coaching to teach every [agency] in regards to the legal guidelines and laws enforced by the opposite [agency]and (c) coordinated outreach and schooling as acceptable.”

This follows the Biden Administration’s July 9, 2021 Govt Order through which it “encourage[d]” the FTC to “contemplate” exercising its statutory rulemaking authority below the FTC Act “to curtail the unfair use of non-compete clauses and different clauses or agreements which will unfairly restrict employee mobility.” Nothing concrete has but come of that Govt Order, though the MOU maybe represents the subsequent stage of the FTC’s “contemplate[ation]”of the difficulty. As we beforehand reported, FTC Chairwoman Lina Khan lately instructed the Wall Road Journal that regulating noncompetes “falls squarely in [the FTC’s] wheelhouse,” and he or she has by no means been shy about sharing her view that noncompetes ought to be banned nationwide and that the FTC has the authority to take action. This view doesn’t seem to have modified regardless of the Supreme Courtroom’s resolution in West Virginia v. EPA.

Solely time will inform what, if any, motion the FTC takes with respect to regulating noncompetes, but when it does take steps to ban or in any other case restrict noncompetes nationwide below Part 5 of the FTC Act, there’ll little question be litigation difficult these laws. And you may wager that the Supreme Courtroom’s resolution in West Virginia v. EPA will probably be entrance and middle in any such problem. Certainly, in line with Law360, US Chamber of Commerce Govt Vice President and Chief Coverage Officer Neil Bradley mentioned that the MOU exhibits Chairwoman Khan’s imaginative and prescient for the FTC “goes nicely past what’s offered in legislation and what was envisioned by Congress.” Chairwoman Khan doesn’t appear too perturbed by the prospect of challenges to the FTC’s authority on this regard, nonetheless, and appears intent on transferring ahead regardless of the Supreme Courtroom’s admonition.

As all the time, we are going to report right here on any future updates to state or federal legislation regarding commerce secrets and techniques, noncompetes, and different restrictive covenants.

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