A sign is seen at the Chamber of Commerce Building in the Manhattan borough of New York City, New York, US, April 21, 2021.
Andrew Kelly Reuters
WASHINGTON – Two Senate Democrats on Tuesday will press the largest US business advocacy organization over threats to sue the Federal Trade Commission over plans to ban noncompete clauses.
Sens. Elizabeth Warren, D-Mass., and Sheldon Whitehouse, D-R.I., requested detailed information from the U.S. Chamber of Commerce about their plans to sue the FTC to stop the proposal. The large lobbying organization represents about 3 million businesses.
“The Chamber’s description of noncompete agreements as a tool to ‘encourage innovation and preserve competition’ is patently false, and represents exactly the kind of Washington insider talk that big business has used for years to justify anti-worker and anti-consumer policies,” he said. letter from the senator addressed to the Chamber of Commerce CEO Suzanne Clark will state.
“A noncompete agreement is a legal contract that prohibits workers from taking the same position with a new employer or starting their own business,” Warren, who sits on the Senate Banking Committee, and Whitehouse, a member of the Senate Finance and Budget committee, will write.
The FTC said the non-compete clause, which affects 1 in 5 American workers, violates the agency’s fair trade laws by preventing workers from starting work at competing businesses until a certain amount of time has passed. The agency called the agreements, usually made when workers start new jobs at companies, exploitative.
New rules that would prevent employers from imposing noncompete clauses could increase workers’ wages by $300 billion annually, according to the FTC.
Noncompete clauses have been banned in at least 10 countries. Oregon’s ban helped raise wages for low-wage workers by 2% to 3%, according to a 2021 study.
But the Chamber called the proposal “unlawful.” In a statement released shortly after the FTC announced its proposal in early January, the organization said Congress did not authorize the agency to change the rules.
Clark announced in January the organization will sue to oppose the proposed regulations. The Chamber’s CEO reiterated his position a few days later in an op-ed in The Wall Street Journal.
In the op-ed, Clark said the FTC’s intention to trigger Section 5 of the FTC Act to prohibit unfair competition undermines the commitment to “protect innovation in the free market.” As written, Section 5 prohibits “acts or practices that are unfair or deceptive or affect commerce” for all persons engaged in commerce, including banks, according to the Consumer Compliance Handbook.
Warren and Whitehouse’s letter to Clark would challenge that view.
“This statement is absurd,” the senators said. “This competition does nothing but stifle competition for workers, businesses looking to hire, and entrepreneurs starting their own businesses.”
To justify the agency’s oversight, senators will refer to a November 2022 policy statement on Section 5 that identifies the FTC’s authority over “coercive, exploitative, collusive, abusive, deceptive, predatory” conduct that extends beyond competition.
Warren and Whitehouse would also argue that banning noncompete clauses is actually better for business. They will write that the agreement reduces wages, inhibits market growth and forces employees to become worse off or out of the workforce.
“Despite the House’s doomsday predictions and threats to sue to overturn the law, the FTC’s proposed rule will help workers, small businesses, and the entire economy, and the agency has the legal right to enforce this rule,” the senators said.
Warren and Whitehouse will issue a deadline of the end of February for the Chamber to provide details of its decision to oppose the noncompete rule, outline the fundraising that has contributed to the effort to oppose the proposal and detail the members who use the noncompete agreement.