FTC Bans Non-Compete Agreements — U.S. Chamber Files Lawsuit

The Federal Trade Commission (FTC) has voted 3-2 to ban non-compete agreements. Existing non-compete agreements — except those for senior executives — will be voided out when the rule finally takes effect.

The PIA is on paper as opposed to the ban.

“Not only will current non-compete agreements become invalid, but employers will have to notify employees in writing that those agreements are no longer valid,” PIA National wrote in a news release. “This will clearly affect insurance agencies wishing to keep producers from leaving and directly competing against them.”

The Democrats on the commission contend non-compete agreements keep individual worker wages low because they can’t easily switch jobs because they signed a non-compete agreement.

The FTC claims one in five of us have signed non-compete agreements. That totals 30 million employees in the U.S. In its decision, the FTC claims the ban will increase worker incomes by $488 billion in the next 10 years.

It will also create more than 8,500 new businesses each year of that decade.

Not so says the U.S. Chamber of Commerce. Immediately after the FTC issued the ban, the chamber filed a lawsuit in a federal court in Texas to ban the ban and keep the FTC ruling from being enforced until the courts make final decisions on whether it actually has the authority to make such a rule.

“Companies will face substantial legal costs as they are forced to resort to other tools to attempt to protect their investments,” the Chamber said. “And the economy as a whole will suffer as start-ups and small businesses are unable to prevent dominant firms from hiring their best employees and gaining access to their confidential information.”

As part of its justification for instituting the ban, the FTC said it solicited comments for a year and received 26,000 responses. Of them, 25,000 favored the ban.

The American Property Casualty Insurance Association (APCIA) also stepped into the fray. “APCIA is concerned that the current proposed rule invalidating non-competes will impact tens of millions of workers across all major industries, including the financial services sector and insurance,” the insurance group noted.

The FTC rule will likely face an uphill battle says Jeremy Merkelson of the law firm Davis Wright Tremaine. It represents employers. He said the FTC doesn’t have the authority to institute a rule when Congress has — over and over — declined to pass bans on non-compete agreements.

“I think the Supreme Court has all it needs to rule that the FTC’s big swing was not greenlit by the legislative branch,” Merkelson said.

PIA National’s Pete Hanson is currently updating the sample producer contracts that we offer to members for free in our member InfoHub at piaw.org, and those will be updated shortly.

He said feel free to reach out to him at phanson@piaw.org if you have questions or if, once it is available, you would like to receive a copy of the updated producer contract from PIA.

Source link: PIA National — https://bit.ly/4aYJJUe

Source link: Insurance Business America — https://bit.ly/3xVPO5b

Source link: Business Insurance — https://bit.ly/3UEs6Dq

Source link: Insurance Journal — https://bit.ly/3UprHDJ

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About PIA Western Alliance

The Professional Insurance Agents Western Alliance is a membership organization promoting and enhancing the success of independent agencies seeking to grow, learn and be heard within the industry.


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