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Matt Gaetz backs FTC’s proposed ban on workplace noncompete agreements

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Matt Gaetz backs FTC’s proposed ban on workplace noncompete agreements

Jun 10, 2024 | 3:22 pm ET
By Mitch Perry
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Matt Gaetz backs FTC’s proposed ban on workplace noncompete agreements
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Florida Republican U.S. Rep. Matt Gaetz in the Capitol in Tallahassee on March 4, 2024. (Photo by Mitch Perry)

Florida Congressman Matt Gaetz is showing his support for the Federal Trade Commission’s (FTC) proposed near-total ban on employers requiring workers to sign so-called “noncompete” agreements, which prevent them from taking a new job or starting a new company.

The Panhandle-area Republican filed an amicus brief last week in a lawsuit in which business groups are challenging the FTC’s plan.

“The Federal Trade Commission’s rule prohibiting most employers from entering or enforcing noncompete agreements with certain workers, subject to narrow exceptions, is a vindication of economic freedom and free enterprise,” Gaetz wrote in his 21-page brief filed in the U.S. District Court for the Northern District of Texas Dallas Division, where the lawsuit is being tried.

“Rooted in Section 5 of the FTC Act’s prohibition against ‘unfair methods of competition,’ the rule reflects the ideal that all power concentrations in the United States, whether public or private, should be limited.”

The Democratic-controlled FTC voted 3-2 in April for the rule to ban noncompete agreements. The U.S. Chamber of Commerce and other business groups immediately filed the lawsuit seeking to strike down the proposal, arguing that the agency lacks authority to regulate unfair methods of competition.

Other groups involved the lawsuit include the Texas Association of Business, the Business Roundtable, and the Longview Chamber of Commerce.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” FTC Chair Lina Khan said in a statement in April. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

The FTC originally proposed the rule in January 2023. Khan has said that the agency received more than 26,000 comments on the rule, with more than 25,000 supporting the FTC’s stance.

In a statement released in April, the FTC estimated the final rule “will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year,” as well as increasing wages for workers by $524 per year. The FTC added that it would help drive innovation, “leading to an estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years under the final rule.”

Khan’s tenure at the Federal Trade Commission has included going after big tech firms such as Amazon, eliciting strong pushback by pro-business organizations like the U.S. Chamber of Commerce and in op-eds in The Wall Street Journal. But it’s also inspired support from Republicans who back her efforts to enforce antitrust law, such as Gaetz.

‘Not an open question’

In his amicus brief, the Florida Republican said that the federal court in Texas should “reject” the effort to “revive a long-settled debate regarding the Federal Trade Commission’s authority to issue substantive rules.”

“The Commission’s Section 6(g) rulemaking power is not an open question, and Congress did not intend for the issue to be litigated each time the Commission seeks to adopt or enforce a rule,” Gaetz writes.

“And, in fact, it is precisely concern over judicial activism that gave rise to these, and other, delegations of authority to federal agencies. Repeatedly, when faced with the opportunity to amend the Federal Trade Commission Act, Congress has upheld, or even expanded, the Commission’s substantive rulemaking authority over unfair methods of competition.”

Florida Republican Marco Rubio introduced legislation last year that would prohibit an employer from enforcing, or threatening to enforce, any non-compete agreement in employment contracts with certain entry-level, lower wage workers, but it hasn’t been moved in the Senate.

A handful of states have passed their own bans on noncompete agreements, including California, Minnesota, North Dakota, and Oklahoma, according to Reuters.