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NAM to FTC: Delay Noncompete Ban

The Federal Trade Commission should delay the effective date of its final noncompete clause rule “to allow for judicial review,” the NAM and approximately 200 national and state business groups told the agency last week. 
What’s going on: “A brief, voluntary delay would provide invaluable certainty as to the rule’s potential effective date and conserve significant resources,” the organizations said.

  • The request comes just more than a month after the FTC voted to finalize a rule that would prohibit noncompete agreements between employers and their workers.
  • The rule is set to go into effect Sept. 4. 

Why it’s important: Even before its effective date, the noncompete ban is causing companies’ costs to skyrocket, harming the economy, the groups told the commission.  

  • “Businesses are identifying existing noncompetes and notifying employees and former employees that their noncompetes may no longer be enforceable,” they said. “Companies are incurring substantial legal costs as they explore other tools to attempt to protect their investments, and workers are losing training opportunities and bargaining power to negotiate compensation.”
  • A noncompete rule would disrupt most manufacturing operations in the U.S., according to a 2023 NAM survey.   

What else we’re doing: Earlier this month, the NAM Legal Center filed an amicus brief asking a Texas federal court to stay the noncompete ban on the grounds that “[m]anufacturers use [noncompete] agreements as an essential tool to protect  
their trade secrets and other proprietary information from misappropriation by their competitors.”

  • The final rule would erode manufacturers’ ability to protect their trade intellectual property from rivals and would make it harder for the sector to attract and keep talent.  
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