The Federal Trade Commission (FTC) announced this week that it will finally hold its much-anticipated vote to finalize its controversial noncompete rule on Tuesday, April 23, 2024, at 2 p.m. The final regulation, which was first proposed in January of 2023, is expected to prevent most employers from enforcing noncompete restrictions, which the FTC claims will lead to increased wages and innovation and remove barriers to entrepreneurs from starting new businesses. Critics of the rule point out that it would harm employee retention, undermine trade secrecy and the freedom to contract and bargain.
During the 90-day comment period for the proposed regulations, the FTC received more than 26,000 comments relating to this rule. Due to the outpouring of public input, the commission is not expected to accept any additional feedback during this meeting. It will proceed to the final vote after comments are heard from FTC Chair Lina Khan, a vote to authorize public disclosure of the rule and a staff presentation by the Office of Policy Planning.
Next Steps
The FTC arguably should have addressed and responded to the thousands of comments it received. However, it is expected that the final rule will look very similar to the original proposal. Once finalized, the rule after publication in the Federal Register the rule will become eligible to be repealed by Congress under expedited procedure provided through the Congressional Review Act (CRA). Congress is currently considering an unprecedented number of CRAs. Since a filibuster-immune CRA review must be undertaken within 60 days of its publishing, any successful attempt to overturn this rule will likely have to take place in the current Congress, as this time frame will expire before the 2024 elections. It will be important to monitor congressional reactions to a final rule to determine opportunities for legislative strategies.
The rule will also likely face multiple legal challenges once it is a final agency action, including from the U.S. Chamber of Commerce, which has already indicated its intention to sue. Given the recent success of many petitioners concerned with government overreach, this seems the most viable method to stop or slow down the need to implement the requirements in the final rule. Petitioners may challenge the rule on various grounds, which include: 1) the FTC exceed its authority under the Federal Trade Commission Act; 2) the FTC requires additional legal authority from Congress allowing for such a resolution, invoking the major questions doctrine and; 3) the rule unlawfully infringes on state contract laws.
