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My attorney friends tell me that the FTC doesn't really have the ability to do this, since contract law is part of state law. (My poor paraphrasing, not theirs.

My attorney friends tell me that the FTC doesn't really have the ability to do this, since contract law is part of state law. (My poor paraphrasing, not theirs.) I've been surprised I haven't seen this mentioned on social media or in the news. Are my friends wrong, or are people celebrating because this is just a step in the right direction even if it may not do anything yet?

BWStearns 2y ago
Options are also contracts and the FTC seems to have succeeded in regulating those.
- yieldcrv 2y ago
  the FTC regulates options? it seems like thats a mixture of the SEC and IRS
  - JumpCrisscross 2y ago
    CFTC regulates commodities-based options, the SEC securities-based ones. The FTC and IRS are not proximately relevant.
    - yieldcrv 2y ago
      I was charitably hoping they were referring to employee stock options where their existence is primarily due to tax regulations of granting RSUs of illiquid company shares, hence IRS but yes, not at all relevant its hard for me to understand why people get the agency acronyms mixed up and interchanged. I can sort of see it, but I’ve just never seen people be so confidently wrong outside of perhaps the eastern medicine crowd.
  - deleted 2y ago
    [deleted]
- fallingknife 2y ago
  That's the CFTC
  - BWStearns 2y ago
    Oops you are correct! Broader point still there that federal regulators can regulate contracts though.
aidenn0 2y ago
It is both true that the FTC's mandate is broad enough to include this and that this might get successfully challenged in the courts.
JumpCrisscross 2y ago
> FTC doesn't really have the ability to do this, since contract law is part of state law The federal government can absolutely regulate both employment and contract law. (Merger agreements are contracts. The FTC was established to block bad mergers.) Whether the FTC can do this is untested. But that’s more a Chevron issue than a federal powers one.
- bdw5204 2y ago
  Relying on a Chevron argument is not particularly wise given the pending Supreme Court cases Relentless Inc. v. Department of Commerce and Loper Bright Enterprises v. Raimondo where the Court is expected to overturn Chevron: https://www.scotusblog.com/2024/01/supreme-court-likely-to-discard-chevron/ https://www.scotusblog.com/2024/01/supreme-court-likely-to-d...
  - faeriechangling 2y ago
    Yup, and the motivation is explicitly to go after unelected “administrative state” technocrats legislating by decree… such as through exactly what they’re doing here. Unelected technocrats legislating by decree is the purview of the Supreme Court not the FTC, so sayeth the majority of current Supreme Court justices. I imagine a bunch of stuff is about to break since elected officials cannot pass jack shit in this hyper-partisan era.
- timeflex 2y ago
  Generally federal law will preempt state law. See the Court's decisions regarding California's attempt to ban arbitration agreements in employment contracts. Now, that doesn't mean the Supreme Court won't come up with their own hot take, but at some point appeals and district courts are just going to say no when they send a case back. What is the Supreme Court going to do? Federal judges can only be removed by impeachment of the House and conviction of the Senate. The Supreme Court has no power to enforce its decisions.
  - banish-m4 2y ago
    The odds of the conservative activism SCOTUS siding with employees and COTUS (bought off by corporate lobbyists) passing a worker-friendly prohibition on noncompetes are both zero. OTOH, it's not outside the realm of possibility that COTUS might pass a federal law superseding laws in California, Colorado, Illinois, Oregon, Nevada, Washington state, and Washington DC to roll back states rights favoring workers. Similar state bills in NY and NJ died in committee in 2022.
yieldcrv 2y ago
The federal government has the constitutional right to regulate interstate commerce, and 100 years ago it discovered that all commerce is now interstate commerce, followed by the supremacy clause which is selectively applied (ie. not for scheduled drugs, but for everything else) This Supreme Court could be friendly to invalidating that expansive interpretation though so, big mismatch from the executive branch / agencies with the judicial branch which could completely warp our relationship with the Federal Government and what we find familiar in our way of life But I dont think its as simple as saying “contract law is part of state law”
- timeflex 2y ago
  The Supreme Court doesn't have any power to enforce its decisions. District and Appeals Courts could just say no to their decisions and there isn't much they can do.
  - Animats 2y ago
    > The Supreme Court doesn't have any power to enforce its decisions. Sure it does. US Marshals are the muscle of the court system. They enforce federal court orders when necessary.
  - cryptonector 2y ago
    When district and appeals courts do what they like, the SCOTUS can reverse every one of their decisions. The inferior courts can then go on a spree of incorrectly deciding every relevant case and delay the final judgement by years, but then the SCOTUS could just speed up its process of reversing every such decision by the inferior courts. The SCOTUS also has options for removing judges from certain types of cases, IIRC. It's a game that the SCOTUS invariably wins in the end -- unless it gets packed.
    - timeflex 2y ago
      There has been times in the past where the other branches ignored the Supreme Courts rulings. They cannot call out troops. The only people that give them power are the other branches that enforce those rulings, but they could decide not to.
hnburnsy 2y ago
Not agreeing, but just posting the other side of the argument from the US Chamber of Commerce. Not a fan of legislation by fiat, maybe this will prompt Congress to do something. USCoC said they will sue... https://www.uschamber.com/finance/antitrust/chamber-comments-on-ftc-proposed-rule-to-ban-noncompetes https://www.uschamber.com/finance/antitrust/chamber-comments... >The Chamber and its membership are strongly opposed to the Proposed Rule. It would categorically ban nearly all noncompete agreements—regardless of individual circumstances, such as a worker’s skill, job responsibilities, access to competitively sensitive and proprietary information, bargaining power, or compensation—and require that organizations rescind all existing agreements and provide notice to affected workers of such rescission. Such a proposal fails to recognize that noncompete agreements can serve vital procompetitive business and individual interests—such as protecting investments in research and development, promoting workforce training, and reducing free-riding—that cannot be adequately protected through other mechanisms such as trade-secret suits or nondisclosure agreements. For centuries, courts have recognized the procompetitive benefits of noncompete agreements and balanced those benefits against any negative costs imposed by particular noncompete agreements. As perhaps acknowledged by the Commission’s request for comments on narrower alternatives, the Commission’s categorical ban would sweep in millions of noncompete agreements that pose no harm to competition, and in fact benefit the U.S. business community, economy, workers, and consumers. https://www.uschamber.com/finance/antitrust/u-s-chamber-to-sue-ftc-over-unlawful-power-grab-on-noncompete-agreements-ban https://www.uschamber.com/finance/antitrust/u-s-chamber-to-s... >The Chamber will sue the FTC to block this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked.
relaxing 2y ago
Interstate commerce is broadly recognized to include just about anything.
- mbreese 2y ago
  Where I am, I know people who are under noncompetes that have a geographical clause. You can’t leave to join a competitor within X miles. In my part of the country, that would include at least three states (maybe more), but other locations would include many more. So, yeah, seems like at least those non-competes impacts interstate commerce.
  - deleted 2y ago
    [deleted]
  - kube-system 2y ago
    You're conflating two different things. The reason those geographical clauses are in those contracts is because many states have ruled that non-competes are illegal unless they are limited in some ways to be "reasonable", and one common way states courts measure this is by ensuring that they are limited to something that might be a reasonable 'business area' that the company competes in. Corporate lawyers typically write in the exact radius that state courts have historically enforced into their non-competes to avoid them being disqualified for being too broad. "Interstate commerce" on the other hand, just means any sort of business activity that crosses state lines. Basically every business engages in interstate commerce, just because commerce requires many interstate activities, like using the internet, or accepting electronic payments, or ordering supplies made in a different state.
    - mbreese 2y ago
      No, I’m not conflating them. I do appreciate why they are written with geographical clauses, but I have always found it odd (and probably unenforceable). I’m just saying that non-competes like this should be regulated under Federal authority because they explicitly cover geographic areas that include multiple states. That’s in addition to the impacts on “interstate commerce” proper (which as you said is basically all commerce). Said another way: I find the argument that non-competes should be allowed or disallowed under the authority of only state laws to be lacking. If a contract in state A dictates what you can do in state B, it’s an interstate issue and Federal law could (should?) be involved.
robertlagrant 2y ago
It may have the ability to, but it's not really anything to do with trade.
SkyBelow 2y ago
If growing food for your own use is interstate commerce, contract law is interstate commerce.
Buttons840 2y ago
Ask your attorney friends if a farmer growing food on their own land to feed to their own animals is "interstate commerce", and ask them to explain that to you. What I'm referring to here is Wickard v Filburn in which the Supreme Court ruled that a farmer growing food on his own land to feed to his own animals was participating in "interstate commerce" and could thus be regulated by the federal government. This is a big part of why the federal government can control things like which plants you are allowed to grow in your home. But when the FTC tries to regulate something like non-competes and protect average workers the corporate attorneys come out of the woodwork, "oh no, the federal government can't do that!"
- modeless 2y ago
  The difference here is that Congress isn't banning noncompetes. The FTC is doing it. Different branch of government.
  - nojito 2y ago
    Congress established the FTC.
    - mminer237 2y ago
      People seem a bit confused. There are a few separate legal questions here: 1. Whether Congress can ban noncompetes nationwide through its ability to regulate interstate commerce. 2. Whether Congress can say "so-and-so can make any laws he wants about x". 3. Whether this is in scope of the FTC's mission of preventing unfair trade practices. To me, #1 is a clear no for intrastate agreements, but under Wickard it is constitutional. #2 is yes under Chevron. #3 seems an obvious yes. The only question would be if SCOTUS decides now is the time to correct what it sees as prior incorrect decisions.
      - cryptonector 2y ago
        The SCOTUS likes to decide things on the narrowest possible grounds. That means that if it wanted to reverse this rule it would want to find grounds relating to (3), which as you note it probably could not. The court could still decide that this rule is a "major powers question" and so belongs to Congress. This would allow the court to not have to reach any question of whether the FTC has broad powers, whether the act that created the FTC is constitutional, or whether Wickard was correctly decided. Therefore it seems more likely that the court would do that -again, if it wanted to reverse the FTC here- than anything else. Can you imagine if the court ruled the FTC to be unconstitutionally created? They wouldn't risk that chaos.
unyttigfjelltol 2y ago
Your friend may recall that the FTC occasionally acts against "deceptive" conduct in the marketplace. If you read the relevant law, it also can act against "unfair" conduct.[1] Sometimes people forget there are two words there separated by "or". This would be an example of an "unfair" practice, which mostly are about predation in the context of unequal bargaining position when litigated under "Little FTC Acts"[2]. I don't know offhand whether these similar laws have been used to achieve the same thing state-by-state, but the FTC rule meets the straight face test for sure. So, regardless of what happens next at the Federal level, this is about to become a white-hot area of litigation under state "Little FTC Acts". [1] https://www.law.cornell.edu/uscode/text/15/57a https://www.law.cornell.edu/uscode/text/15/57a [2] https://litigationcommentary.org/2021/06/15/a-fresh-look-at-state-little-ftc-acts/ https://litigationcommentary.org/2021/06/15/a-fresh-look-at-...
xbar 2y ago
It is a good question. I am glad that the FTC is testing it.
jameshart 2y ago
If a noncompete agreement between a former employer, and a person who resides in a particular state, purports to prevent that person from taking up an employment contract with another employer - including by one who is located in a different state… well that seems like that could be an unfair restraint on interstate commerce.
xpe 2y ago
I’m not a constitutional scholar, but I’ll say this —- there’s a reason this one is debated. It seems to me (with around 70% probability) that there are many possible constructions that could emerge which would more or less conform to the (rather contingent) bar for Supreme Court decisions. I say contingent because the history of the Supreme Court is far from a deductive process of pure interpretation. I recognize the utility of the Supreme Court while dismissing any grandiose claims of objective morality or obvious legality. It is a body of people after all.

BWStearns 2y ago

Options are also contracts and the FTC seems to have succeeded in regulating those.

yieldcrv 2y ago
the FTC regulates options? it seems like thats a mixture of the SEC and IRS
- JumpCrisscross 2y ago
  CFTC regulates commodities-based options, the SEC securities-based ones. The FTC and IRS are not proximately relevant.
  - yieldcrv 2y ago
    I was charitably hoping they were referring to employee stock options where their existence is primarily due to tax regulations of granting RSUs of illiquid company shares, hence IRS but yes, not at all relevant its hard for me to understand why people get the agency acronyms mixed up and interchanged. I can sort of see it, but I’ve just never seen people be so confidently wrong outside of perhaps the eastern medicine crowd.
- deleted 2y ago
  [deleted]
fallingknife 2y ago
That's the CFTC
- BWStearns 2y ago
  Oops you are correct! Broader point still there that federal regulators can regulate contracts though.

aidenn0 2y ago

It is both true that the FTC's mandate is broad enough to include this and that this might get successfully challenged in the courts.

JumpCrisscross 2y ago

> FTC doesn't really have the ability to do this, since contract law is part of state law The federal government can absolutely regulate both employment and contract law. (Merger agreements are contracts. The FTC was established to block bad mergers.) Whether the FTC can do this is untested. But that’s more a Chevron issue than a federal powers one.

bdw5204 2y ago
Relying on a Chevron argument is not particularly wise given the pending Supreme Court cases Relentless Inc. v. Department of Commerce and Loper Bright Enterprises v. Raimondo where the Court is expected to overturn Chevron: https://www.scotusblog.com/2024/01/supreme-court-likely-to-discard-chevron/ https://www.scotusblog.com/2024/01/supreme-court-likely-to-d...
- faeriechangling 2y ago
  Yup, and the motivation is explicitly to go after unelected “administrative state” technocrats legislating by decree… such as through exactly what they’re doing here. Unelected technocrats legislating by decree is the purview of the Supreme Court not the FTC, so sayeth the majority of current Supreme Court justices. I imagine a bunch of stuff is about to break since elected officials cannot pass jack shit in this hyper-partisan era.
timeflex 2y ago
Generally federal law will preempt state law. See the Court's decisions regarding California's attempt to ban arbitration agreements in employment contracts. Now, that doesn't mean the Supreme Court won't come up with their own hot take, but at some point appeals and district courts are just going to say no when they send a case back. What is the Supreme Court going to do? Federal judges can only be removed by impeachment of the House and conviction of the Senate. The Supreme Court has no power to enforce its decisions.
- banish-m4 2y ago
  The odds of the conservative activism SCOTUS siding with employees and COTUS (bought off by corporate lobbyists) passing a worker-friendly prohibition on noncompetes are both zero. OTOH, it's not outside the realm of possibility that COTUS might pass a federal law superseding laws in California, Colorado, Illinois, Oregon, Nevada, Washington state, and Washington DC to roll back states rights favoring workers. Similar state bills in NY and NJ died in committee in 2022.

yieldcrv 2y ago

The federal government has the constitutional right to regulate interstate commerce, and 100 years ago it discovered that all commerce is now interstate commerce, followed by the supremacy clause which is selectively applied (ie. not for scheduled drugs, but for everything else) This Supreme Court could be friendly to invalidating that expansive interpretation though so, big mismatch from the executive branch / agencies with the judicial branch which could completely warp our relationship with the Federal Government and what we find familiar in our way of life But I dont think its as simple as saying “contract law is part of state law”

timeflex 2y ago
The Supreme Court doesn't have any power to enforce its decisions. District and Appeals Courts could just say no to their decisions and there isn't much they can do.
- Animats 2y ago
  > The Supreme Court doesn't have any power to enforce its decisions. Sure it does. US Marshals are the muscle of the court system. They enforce federal court orders when necessary.
- cryptonector 2y ago
  When district and appeals courts do what they like, the SCOTUS can reverse every one of their decisions. The inferior courts can then go on a spree of incorrectly deciding every relevant case and delay the final judgement by years, but then the SCOTUS could just speed up its process of reversing every such decision by the inferior courts. The SCOTUS also has options for removing judges from certain types of cases, IIRC. It's a game that the SCOTUS invariably wins in the end -- unless it gets packed.
  - timeflex 2y ago
    There has been times in the past where the other branches ignored the Supreme Courts rulings. They cannot call out troops. The only people that give them power are the other branches that enforce those rulings, but they could decide not to.

hnburnsy 2y ago

Not agreeing, but just posting the other side of the argument from the US Chamber of Commerce. Not a fan of legislation by fiat, maybe this will prompt Congress to do something. USCoC said they will sue... https://www.uschamber.com/finance/antitrust/chamber-comments-on-ftc-proposed-rule-to-ban-noncompetes https://www.uschamber.com/finance/antitrust/chamber-comments... >The Chamber and its membership are strongly opposed to the Proposed Rule. It would categorically ban nearly all noncompete agreements—regardless of individual circumstances, such as a worker’s skill, job responsibilities, access to competitively sensitive and proprietary information, bargaining power, or compensation—and require that organizations rescind all existing agreements and provide notice to affected workers of such rescission. Such a proposal fails to recognize that noncompete agreements can serve vital procompetitive business and individual interests—such as protecting investments in research and development, promoting workforce training, and reducing free-riding—that cannot be adequately protected through other mechanisms such as trade-secret suits or nondisclosure agreements. For centuries, courts have recognized the procompetitive benefits of noncompete agreements and balanced those benefits against any negative costs imposed by particular noncompete agreements. As perhaps acknowledged by the Commission’s request for comments on narrower alternatives, the Commission’s categorical ban would sweep in millions of noncompete agreements that pose no harm to competition, and in fact benefit the U.S. business community, economy, workers, and consumers. https://www.uschamber.com/finance/antitrust/u-s-chamber-to-sue-ftc-over-unlawful-power-grab-on-noncompete-agreements-ban https://www.uschamber.com/finance/antitrust/u-s-chamber-to-s... >The Chamber will sue the FTC to block this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked.

relaxing 2y ago

Interstate commerce is broadly recognized to include just about anything.

mbreese 2y ago
Where I am, I know people who are under noncompetes that have a geographical clause. You can’t leave to join a competitor within X miles. In my part of the country, that would include at least three states (maybe more), but other locations would include many more. So, yeah, seems like at least those non-competes impacts interstate commerce.
- deleted 2y ago
  [deleted]
- kube-system 2y ago
  You're conflating two different things. The reason those geographical clauses are in those contracts is because many states have ruled that non-competes are illegal unless they are limited in some ways to be "reasonable", and one common way states courts measure this is by ensuring that they are limited to something that might be a reasonable 'business area' that the company competes in. Corporate lawyers typically write in the exact radius that state courts have historically enforced into their non-competes to avoid them being disqualified for being too broad. "Interstate commerce" on the other hand, just means any sort of business activity that crosses state lines. Basically every business engages in interstate commerce, just because commerce requires many interstate activities, like using the internet, or accepting electronic payments, or ordering supplies made in a different state.
  - mbreese 2y ago
    No, I’m not conflating them. I do appreciate why they are written with geographical clauses, but I have always found it odd (and probably unenforceable). I’m just saying that non-competes like this should be regulated under Federal authority because they explicitly cover geographic areas that include multiple states. That’s in addition to the impacts on “interstate commerce” proper (which as you said is basically all commerce). Said another way: I find the argument that non-competes should be allowed or disallowed under the authority of only state laws to be lacking. If a contract in state A dictates what you can do in state B, it’s an interstate issue and Federal law could (should?) be involved.

robertlagrant 2y ago

It may have the ability to, but it's not really anything to do with trade.

SkyBelow 2y ago

If growing food for your own use is interstate commerce, contract law is interstate commerce.

Buttons840 2y ago

Ask your attorney friends if a farmer growing food on their own land to feed to their own animals is "interstate commerce", and ask them to explain that to you. What I'm referring to here is Wickard v Filburn in which the Supreme Court ruled that a farmer growing food on his own land to feed to his own animals was participating in "interstate commerce" and could thus be regulated by the federal government. This is a big part of why the federal government can control things like which plants you are allowed to grow in your home. But when the FTC tries to regulate something like non-competes and protect average workers the corporate attorneys come out of the woodwork, "oh no, the federal government can't do that!"

modeless 2y ago
The difference here is that Congress isn't banning noncompetes. The FTC is doing it. Different branch of government.
- nojito 2y ago
  Congress established the FTC.
  - mminer237 2y ago
    People seem a bit confused. There are a few separate legal questions here: 1. Whether Congress can ban noncompetes nationwide through its ability to regulate interstate commerce. 2. Whether Congress can say "so-and-so can make any laws he wants about x". 3. Whether this is in scope of the FTC's mission of preventing unfair trade practices. To me, #1 is a clear no for intrastate agreements, but under Wickard it is constitutional. #2 is yes under Chevron. #3 seems an obvious yes. The only question would be if SCOTUS decides now is the time to correct what it sees as prior incorrect decisions.
    - cryptonector 2y ago
      The SCOTUS likes to decide things on the narrowest possible grounds. That means that if it wanted to reverse this rule it would want to find grounds relating to (3), which as you note it probably could not. The court could still decide that this rule is a "major powers question" and so belongs to Congress. This would allow the court to not have to reach any question of whether the FTC has broad powers, whether the act that created the FTC is constitutional, or whether Wickard was correctly decided. Therefore it seems more likely that the court would do that -again, if it wanted to reverse the FTC here- than anything else. Can you imagine if the court ruled the FTC to be unconstitutionally created? They wouldn't risk that chaos.

unyttigfjelltol 2y ago

Your friend may recall that the FTC occasionally acts against "deceptive" conduct in the marketplace. If you read the relevant law, it also can act against "unfair" conduct.[1] Sometimes people forget there are two words there separated by "or". This would be an example of an "unfair" practice, which mostly are about predation in the context of unequal bargaining position when litigated under "Little FTC Acts"[2]. I don't know offhand whether these similar laws have been used to achieve the same thing state-by-state, but the FTC rule meets the straight face test for sure. So, regardless of what happens next at the Federal level, this is about to become a white-hot area of litigation under state "Little FTC Acts". [1] https://www.law.cornell.edu/uscode/text/15/57a https://www.law.cornell.edu/uscode/text/15/57a [2] https://litigationcommentary.org/2021/06/15/a-fresh-look-at-state-little-ftc-acts/ https://litigationcommentary.org/2021/06/15/a-fresh-look-at-...

xbar 2y ago

It is a good question. I am glad that the FTC is testing it.

jameshart 2y ago

If a noncompete agreement between a former employer, and a person who resides in a particular state, purports to prevent that person from taking up an employment contract with another employer - including by one who is located in a different state… well that seems like that could be an unfair restraint on interstate commerce.

xpe 2y ago

I’m not a constitutional scholar, but I’ll say this —- there’s a reason this one is debated. It seems to me (with around 70% probability) that there are many possible constructions that could emerge which would more or less conform to the (rather contingent) bar for Supreme Court decisions. I say contingent because the history of the Supreme Court is far from a deductive process of pure interpretation. I recognize the utility of the Supreme Court while dismissing any grandiose claims of objective morality or obvious legality. It is a body of people after all.