Analysis by Energy Workforce President Tim Tarpley
On Tuesday of last week, the FTC voted 3-2 to ban the vast majority of non-compete agreements that are currently in effect for millions of Americans. In fact, the FTC estimates that 18% of the US workforce, some 30 million people, are currently under some form of a noncompete agreement. The new rule will go into effect 120 days after it is published in the Federal Register (which has not occurred). It is possible that the rule could be enjoined before the 120 timeline, however. The rule bans all new non-competes essentially across the board (with a small exception for the sale of a company). Retroactively, the rule prohibits existing non-competes for most workers but does retain an exception for “senior executives” (those making over $151,164 a year). These contracts will be allowed to remain in place going forward.
This rule could have significant implications for EWTC companies going forward. When the original rule was proposed, EWTC formed a working group and submitted comments expressing a number of concerns. (Energy Workforce FTC Non-Compete Proposed Rule Comments) Perhaps the most relevant is how this rule will affect the ability of US companies that deal with significant intellectual property and new technologies to be able to prevent employees from leaving and going to competitors and taking their knowledge gained during their employment with them. It was hoped that the FTC would have a carve-out for the prohibition for certain positions which deal with IP; however, this did not occur in the final rule. There is a carve-out for existing contracts for “senior executives”; however, with no ability for future contracts going forward over time, this carve-out will become less and less relevant over time. There are still other laws covering trade secrets that can come into play and many expect differed compensation could also be increasingly used to retain talent, however the market will certainly have to work out how this significant change ultimately plays out.
Some groups are already crying foul of this rule and the implications for US business. The US Chamber quickly filed suit stating, “This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy.” Many other business trade groups and individual companies joined the suit. Much of the opposition is arguing that the FTC does not have the authority to issue the rule in the first place. In fact, Andrew Ferguson, a dissenting FTC commissioner stated: “No matter how important, conspicuous and controversial the issue, and no matter how wise the administrative solution, an administrative agency’s power to regulate must always be grounded in the valid grant of authority from Congress. Because we lacked that authority, the final rule is unlawful.” We can expect this element to face significant litigation and likely ultimately end up in the Supreme Court which will ultimately determine if the rule stands.
The cases challenging this rule may end up being the first major case to be interpreted under a potential variation of the Chevron doctrine, which generally requires courts to defer to federal agencies on how to interpret ambiguous federal laws that outline their regulatory mandate. In recent years conservative judges and legal scholars have criticized Chevron for ceding too much power to regulatory agencies. Many believe the Supreme Court could overturn or at least substantially rewrite Chevron later this term, which would give the judiciary much greater power to overturn federal rules and regulations. It’s possible the FTC rule could end up being the test case for this new framework.
Natural Resources Week begins in the House
This week the House of Representatives will begin its Natural Resources Week with a number of bills hitting the floor of the full House that have passed out of that committee. Of particular note to EWTC is H.R. 6285, the “Alaska Right to Produce Act” which would reverse the recent Biden Administration’s finalized rule to limit oil and gas leasing on 13 million acres of the National Petroleum Reserve in Alaska. That bill is bipartisan, it is lead by Rep. Pete Stauber (R-MN) who chairs the Energy and Mineral Resources Subcommittee as well as Rep. Petola (D-AK) the first Alaska native to serve in Congress. We expect the bill to pass out of the House with a few Democrats joining Republicans. Although Senate action appears unlikely at this point, a strong bipartisan vote out of the House will certainly put some pressure on the administration to reverse course as to their federal lands leasing policy.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
