Amid Bipartisan Calls to Ban Noncompete Agreements, a Moment of Truth for Trump’s FTC

Noncompetes are unpopular and contrary to the operation of the free market.

By Blake Narendra, Senior Advisor and former Special Advisor to FTC Chair Lina Khan

Last November, Andrew Ferguson, the current chair of the Federal Trade Commission boldly declared that President Trump would be the “most pro-worker Administration in history.” That claim is about to be put to the test. The FTC needs to let a federal appeals court know by July 10^th whether it intends to continue defending its 2024 rule banning most employee noncompete agreements. A decision to walk away – and effectively scrap the rule — would fly in the face of pronouncements by the Administration about its support for workers.

Once limited to high-earning employees with specialized skills, technology allowed the noncompete agreements to proliferate, and today it is estimated that one in five workers has signed one. The contracts stop employees from taking work with a competitor or starting a competing business for a set time frame. This leaves millions of Americans, ranging from minimum wage fast food workers to high net worth Wall Street traders, effectively trapped in their current positions. This isn’t just an inconvenience for the workers involved. Non-competes rob the economy of dynamism, and cost the average American worker $524 a year.

The FTC adopted a noncompete ban last year, as part of its efforts under then-Chair Lina Khan to restore fairness and vitality to the American marketplace. Nonetheless, the two Republican commissioners dissented to the 3-2 final rule last year. Ferguson was one of those two commissioners. This is not a harbinger of good news for millions hoping that the FTC will sustain its defense of the noncompete rule.

In his dissent, Ferguson argued that the matter was best left to Congress — and that Congress, by repeatedly failing to pass the Workforce Mobility Act, legislation that would, if enacted, ban non-competes, means that “Congress…considered and rejected” putting a stop to the practice

This is absolute balderdash. As a former senior staffer to Senate Majority Leader Mitch McConnell, Ferguson knows that’s not how the legislative process works. By Ferguson’s logic, the FTC’s rule banning junk fees in ticketing and short-term lodging should not have taken effect because Congress failed to act on the substantively similar bills after Elon Musk’s intervention last December. Similarly, it would follow that the FTC was wrong to finalize its Click-to-Cancel Rule last year because similar legislation was not marked up or passed in previous Congresses. FTC’s enforcement actions against John Deere on the Right to Repair and against pharmacy benefit managers (PBMs) – both actions which Ferguson supports – are also ahead of similar legislative efforts by Congress.

Moreover, legislative progress often lags behind popular sentiment, particularly when well-resourced trade associations obscure broad public support by banking on a friendly court and/or its lobbying muscle of Congress to kill or slow down meaningful reform and this is most certainly true when it comes to banning noncompetes. Putting a stop to these restrictive employment contracts enjoys broad and meaningful bipartisan support. Almost two-thirds of voters polled last August support the FTC’s rule, including 54% of Republicans. The FTC’s public docket further supports that this issue is not a “red-state” or “blue-state” issue. 90% of the whopping 26,000 respondents expressed support for the rule including 100% in ruby-red Mississippi and 98% in deep-blue Massachusetts.

In fact, it is likely that Chairman of the House Judiciary Committee, Jim Jordan, sat on a resolution of disapproval under the Congressional Review Act to nullify the FTC’s noncompete rule because he knew it would be a tough vote for some of his Republican members. When the most recently appointed commissioner, Mark Meador, appeared before the Commerce Committee, Sen. Todd Young – a Republican — sought – and received — commitment that the FTC would make enforcement of noncompetes a priority.

The issue enjoys so much bipartisan support in Congress that Young teamed up with Democratic Senator Chris Murphy to reintroduce the Workforce Mobility Act last month. The timing is hardly a coincidence. Each Senator knows a court decision to axe the rule would (at best) delay relief for millions. As Senator Murphy argues, “The FTC should continue defending its rule to ban non-competes, but Congress should make the policy permanent and pass our legislation to protect workers and support entrepreneurs.”

The Congressional legislation would also broaden the coverage of a noncompete ban. For instance, the bill would nullify noncompetes for workers employed by not-for-profit organizations, like hospitals, a group not covered by the FTC regulation because it’s possible the agency lacks jurisdiction over the sector. Nonetheless, the FTC’s docket is full of doctors, nurses, and other hospital workers who pleaded with the FTC to extend coverage of the noncompete ban to their hospital employers.

Let me be clear: banning noncompetes should not be a partisan issue, and not simply because Republican voters also hate them. Noncompetes are contrary to the operation of the free market because they block the efficient matching of workers with hiring firms. The Republican Party has long embraced this free-market ethos. But the free market is not operating as intended when a decorated veteran of Afghanistan is blocked from starting his own business to help veterans who have suffered orthopedic injuries – or when 130 public commenters equate their work experience to that of a “slave” or “slaves.” As Taylor, a commenter from Virginia summed up, noncompetes “are antithetical to the Free Market and as such have no place in the American workforce.”

Finally, if the Ferguson-led FTC is contemplating changing the FTC’s position supporting the non-compete rule, it is imperative that it afford the public another chance to weigh in. American workers deserve (and the law entitles them to) a chance to weigh in, just as they did when the FTC put out their call for comments when it proposed the rule. Moreover, its own rules demand that. The Administrative Procedure Act (APA) is clear about the requirements for rescinding a rule even if it is considered “unlawful”; it requires a public notice and comment period. For a “major rule” that would have a massive (beneficial) impact on the economy,

The FTC also cannot change its official position that the rule is valid without a vote of the Commission. And in the spirit of holding “unelected bureaucrats” like him accountable to the laws Congress has passed, Ferguson should finally answer calls to host an Open Commission Meeting that would bring him face to face with the issue. That includes Taylor from Virginia who wrote to the FTC that “he almost cried tears of happiness when (he) saw this potential ban.”

But back to that test of the Trump administration’s intent. Needless to say, many of the Administration’s actions to date contradict Ferguson’s pronouncement about the Trump administration’s concern for workers. In his first months, the President disbanded the National Labor Relations Board, slashed pay for low-wage Federal contractors, and upended the Occupational Safety and Health Administration. Worse, Ferguson’s FTC has yet to do anything that would support his most “pro-worker” Administration in history claim. The Joint Labor Taskforce, announced by the FTC, would be a useful data point if and only if the Commission had announced any actions to crack down on employers harming workers through illegal employment provisions, including noncompetes.

This is a golden opportunity for the Ferguson FTC to embrace a rule that is popular with millions of workers including those who helped deliver President Trump the White House. In doing so, the mantle of “most pro-worker” President in history would be deserving of something more than an eye roll.