The Federal Trade Commission's recent proposal to ban noncompetition agreements likely changes the calculus for lawmakers hoping to legislate on the issue in Congress, with some seeking to put a similar but more permanent policy in place.

Earlier this month, the FTC proposed to eliminate nearly all future worker noncompetes and rescind those already in place. The agency is likely to face a long legal fight over its authority to make such a sweeping rule, leaving Congress the decision of whether to wait and see or be proactive, a former FTC chairman said.

"One reaction of Congress could be 'We don't have to do anything because we should let the FTC work with their initial proposal and see how that goes,’" said William Kovacic, a member of the commission from 2006 to 2011, and chairman of the agency from 2008 to 2009. "And some members of Congress could react to the issuance of the rule saying 'We never gave the FTC that authority. It is an important issue, we’ll take it on and we’ll do something.’"

"So sometimes it can be a catalyst for legislation," Kovacic said.

Noncompete agreements that bar employees from switching jobs to competitors impact about one in every five Americans, according to the FTC. The issue has increasingly been part of the national dialogue as proposals to restrict the agreements pop up in state legislatures and the Biden administration pushes for a more competitive economy.

Lawmakers in both chambers and from both parties have already announced their intention to try and act.

Sen. Chris Murphy (D-Conn.) and Rep. Mike Garcia (R-Calif.) are both planning to reintroduce bills that tackle noncompete clauses, though the approaches will differ. Murphy’s bill is similarly broad to the FTC proposal in banning almost all agreements, while Garcia’s noncompete ban wouldn’t apply to employees who are exempt from federal overtime pay requirements.

"All four of us are very excited about the FTC’s decision to move forward, but we’d like to give them clear statutory authority," said Murphy, whose proposed Workforce Mobility Act in the 117th Congress was co-sponsored by Sens. Todd Young (R-Ind.), Tim Kaine (D-Va.), and Kevin Cramer (R-N.D.).

Murphy’s bill, as well as narrower proposals from Garcia and Sen.Marco Rubio (R-Fla.), all stalled in the last Congress, failing to even make it to a committee vote. But now, as the issue gains renewed attention and the FTC’s authority on the issue is in question, some feel this is the right time for Congress to regulate such agreements.

"I think the FTC’s actions helped generate a lot of interest around the topic, and there are a number of members of Congress who question the legality of their actions. So in conjunction with continuing conversations about the FTC’s actions, I think legislative proposals will be entertained," Young said.

HAMPERED SOCIAL MOBILITY
Lawmakers, activists, and academics opposed to noncompetes in the workplace have warned for years of the paralyzing effects of such agreements, which they say hamper social mobility. Workers are passionate about the issue even as it has been largely off of Congress’s radar, according to University of Maryland professor Evan Starr.

"Those workers on the back end realize they can’t take another job in their industry for two years or they have to move their whole family. It’s very jarring for workers who realize that they can be held to these restrictions," said Starr, an assistant professor of management and organization at the Robert H. Smith School of Business. "It evokes very, very strong feelings among workers about fairness, about their ability to provide for themselves."

Banning noncompete agreements also benefits businesses by increasing competition for talent in the labor market, said Orly Lobel, a professor at the University of San Diego School of Law. States that enforce noncompete agreements saw a "brain drain" with qualified workers moving to places where they weren’t enforced, she said.

A noncompete ban is good policy "not only to protect workers, but to have a more competitive economy," said Lobel. "We’re not used to thinking about the labor market as a market."

Rep. Garcia said there’s a lot of interest in noncompetes even if it isn’t one of the top Republican priorities this session.

"The average blue collar worker who’s just doing trades for Hollywood production sets shouldn’t have to be signing noncompete clauses that prevent them literally from working on other projects," said Garcia, who represents northern Los Angeles County.

Unionized workers who are subject to such agreements also need the Republican party’s attention, he said. "It can’t be an us versus them mentality with unions."

LEGISLATIVE MOMENTUM

In the absence of federal action, states have legislated on such agreements for years, and influenced the FTC’s rule proposal.

But the lack of congressional action doesn’t mean some lawmakers haven’t focused on the issue. Murphy has introduced bills on the topic since 2015, but has yet to see Senate floor consideration.

Yet Kovacic thinks that a heightened public awareness around noncompetes and questions about the FTC’s authority to ban them may ultimately motivate lawmakers to act.

"Doubts about the FTC authority, I think, will lead advocates of reform in Congress to press ahead as a safeguard in case the FTC fails in its effort to defend the rule in court," he said.

But some lawmakers were unsure of whether the FTC’s proposed rule, which is receiving public comments until March 20, will propel or potentially stall legislation.

"I’ve been a co-sponsor of bills dealing with noncompetes and I was really happy to see the action," Kaine said. "When you see action like that, though, sometimes that takes the steam out of legislative efforts."