Businesses Continue to Oppose Rule Change that Would Threaten Proprietary Information

It appears the Federal Trade Commission (FTC) will hold off on voting on whether to ban most types of non-compete agreements between employers and employees until next year.

Earlier this month, Bloomberg reported that the regulatory agency is expected to wait until April 2024 to vote on a final version of the non-competes ban. In January, the FTC proposed a new rule that would generally prohibit employers from using non-compete clauses by making it illegal for an employer to enter into a non-compete agreement with a worker, maintain a non-compete with a worker or represent to a worker that they were subject to a non-compete. The agency has said the prohibition is necessary to expand the career opportunities of 30 million Americans and that it could lead to wage increases of nearly $300 billion annually – although it has not provided information on how it came to those numbers.

The move was quickly opposed by business groups and trade associations, including FEDA, over its broad implications and because it would damage employers’ ability to protect proprietary business information and trade secrets. Further, business organizations believe the move would overstep the FTC’s constitutional and statutory authority while usurping Congress’ legislative role.

Act Aims to Plug Trucking Industry’s 78,000 Driver Shortage

A bill that would lower the age requirement to drive commercial trucks across state lines is now being considered by the House of Representatives.

H.R. 3408, the DRIVE Safe Integrity Act, builds off the pilot program that was included in the 2021 bipartisan Infrastructure Investment and Jobs Act. However, that program has been bogged down by extraneous requirements from the U.S. Department of Transportation (DOT), meaning it has seen fewer than a dozen of the expected 3,000 enrollees. The bill, introduced by Reps. Rick Crawford (R-AR) and Henry Cuellar (D-TX) would remove federal rules that block 18- to 20-year-old truck drivers from participating in interstate commerce. Already, 49 states allow these younger drivers to hold a commercial trucking license, however, they are currently prohibited from driving across state lines. If signed into law, the bill would help the trucking industry address a shortage of 78,000 drivers, a necessity to keep the nation’s supply chains moving.

The DRIVE Safe Coalition, a group of more than 120 business and trade groups, including FEDA, sent a letter to the House Committee on Transportation and Infrastructure on May 22 asking them to support the new legislation. “The DRIVE Safe Integrity Act will ensure the pilot program fulfills its purpose by urging DOT to take corrective action to improve program participation, requiring progress reports from DOT to Congress, and directing DOT to review data upon conclusion of the pilot program to inform regulations creating a permanent younger driver apprenticeship program,” the letter states.

“Building a seamless and resilient supply chain requires a skilled, vibrant, and growing trucking workforce,” it continues. “This legislative proposal will bolster new career pathways into interstate trucking operations while promoting safety and training standards that far exceed the bar set by states today. By steering the Safe Driver Apprenticeship Pilot program back to the course Congress originally intended, the DRIVE Safe Integrity Act will ensure trucking has the talent it needs to meet the economy’s freight demands in the years to come.”

The full letter is available here.

Bill Would Speed Up Permit Process, Cap Federal Budget Growth

Congressional leaders and the White House came to a tentative agreement to address the debt ceiling over the weekend, however, it will still need approval from a majority of legislators in both chambers.

Speaker of the House Rep. Kevin McCarthy (R-CA) and President Joe Biden and their teams have spent the last several weeks working toward an agreement that would avoid a default. Those negotiations resulted in a deal that would suspend the debt limit, which stands at $31.4 trillion, until Jan. 1, 2025 — effectively resolving the issue until after the 2024 election. In exchange, the Biden administration agreed to limit federal government budget growth by 1 percent for the next six years, although that provision will not be enforceable beginning in 2025. The White House has estimated the plan would reduce government spending by at least $1 trillion.

The 99-page Fiscal Responsibility Act also rescinds about $30 billion in unspent COVID-19 relief funding and reduces IRS funding by $1.4 billion — both priorities for Republicans during negotiations. Further, it raises the age limit on work requirements for adults from 49 to 54 for the Supplemental Nutrition Assistance Program until 2030, when it will return to age 49, and makes it more difficult for states to waive work requirements for certain individuals receiving beneifts.

Included in the bill are revisions to the permitting process construction projects must go through, especially in regard to environmental review. Changes to the National Environmental Policy Act would designate a single lead agency to develop and schedule environmental reviews in the hopes that it speeds up the often lengthy and expensive process. Agencies will now have only one year to complete most environmental reviews, and projects determined to have complex impacts on the environment will have two years. This was among the top priorities for many business groups and trade associations.

The U.S. Treasury had previously cited June 1 as the day the United States would likely default on its debt if a deal were not reached. The Treasury has since adjusted that date to June 5, giving lawmakers some additional time to hold a vote on the negotiated debt ceiling bill. McCarthy has stated the House would vote on the legislation on Wednesday, May 31.

Deal Could Address Permitting Reform and Discretionary Spending

As the United States looms closer to defaulting on its debt, business organizations are urging President Joe Biden and other elected officials to reach a compromise on raising the debt ceiling.

The federal government is expected to default if the $31.4 trillion debt ceiling is not raised by June 1. Biden was originally scheduled to meet with lawmakers, including House Speaker Kevin McCarthy (R-CA), on Friday but the meeting has been postponed to this week. In late April, House Republicans passed a bill that would raise the debt limit but undo much of Biden’s agenda, including recently passed climate and tax laws, and would freeze spending for a decade. The bill was considered a non-starter among many Democrats and Biden indicated he would veto it. Neither side has been able to make substantial progress on an agreement since.

“We urge civility and bipartisanship as solutions are discussed to raise the debt ceiling and reduce out-of-control federal spending,” said Eric Hoplin, president and CEO of the National Association of Wholesaler-Distributors. “The time for partisan politics and talking points is over. Washington must get serious about raising the debt ceiling and protecting our economy while taking serious steps toward addressing the out-of-control spending that led us here in the first place. We must enact sound fiscal policies to ensure that we never again test the fiscal cliff and place American businesses and families in a dangerous economic position.”

U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley echoed the NAW’s statement, saying “The full faith and credit of the United States government should never be placed at risk."

Instead, Bradley offered suggestions on where Democrats and Republicans can find a compromise. “While there are plenty of areas where the two parties disagree, two areas that are ripe for inclusion are permitting reform and an agreement on discretionary spending caps, both of which can improve the federal government’s fiscal outlook. Leaders in both parties have made clear that our broken permitting process must be fixed and based on the proposals introduced in Congress, it is clear that a bipartisan agreement is possible," he continued. "Over the long run, permitting reform has the potential to reduce the costs of projects, allowing more to be completed, and facilitate investment in infrastructure by providing greater predictability, transparency, and efficiency.

“Both Republicans and Democrats have acknowledged that they will have to reach an agreement on top-line discretionary spending levels in order to complete the appropriations process and fund the government. Capping spending below the current projected baselines will reduce future deficits while providing greater certainty to the appropriations process."

Julie Su’s Record Demonstrates Anti-Business Activism and Mismanagement

Business and trade associations, including FEDA, are sending a letter to U.S. senators asking them to oppose the confirmation of anti-business activist Julie Su to replace Marty Walsh as secretary of labor.

After two years in the role, Walsh left President Joe Biden’s Cabinet in March 2023 to become the head of the National Hockey League Player’s Association. Biden has nominated Su, the federal government’s deputy secretary of labor, to fill the position, but her nomination has come under scrutiny over her record on labor relations and her effectiveness during her tenure as California’s Secretary of Labor. During her time overseeing labor relations in the country’s largest state, Su spearheaded initiatives that jeopardized millions of independent contractor relationships. She was also integral in the formation and implementation of A.B. 5, a law that effectively banned independent contractor relationships in the state and left millions unsure whether they could continue to work as self-employed individuals. California voters eventually rejected the bill by passing Proposition 22 in 2020.

Su was also a supporter of California’s Fast Food Accountability and Standards Recovery Act (FAST Act), which gives an unelected board complete autonomy over the state’s fast food industry, including the power to set wages and establish employment conditions. The law was opposed by California’s own Department of Finance on the grounds that enforcement would increase government costs and lead to a fragmented regulatory and legal environment for employers.

Under Su’s leadership, the California Employment Development Department mismanaged COVID-19-related unemployment insurance funds, resulting in $30 billion in fraudulent payments. The situation led to delays or denials in receiving benefits for hundreds of thousands of Californians.

“We ask you to vote against Ms. Su for secretary of labor based on her troubling record and her failure to adequately explain how she would run the department in a manner that engages employers and employees alike to best achieve our shared economic goals,” the letter states.

The full letter is available here.

NAW Data Shows Distributors Rely on Non-Competes to Protect Proprietary Info

The Federal Trade Commission’s proposed outright ban on non-compete agreements would have detrimental impacts on distributors, according to new information from the National Association of Wholesaler-Distributors (NAW).

A recent survey of NAW members found that more than 80 percent use non-compete agreements. Most use non-competes for a narrow segment of highly-skilled, highly-paid employees, such as executive officers and managers who have intimate knowledge of the business’ operations and long-term strategy, and sales staff with proprietary vendor and customer information. The majority of companies implement them for fewer than 20 percent of employees, the NAW reported.

If the FTC's prohibition on non-competes is adopted, it would leave wholesaler-distributors few other options to protect their proprietary information, according to the NAW. “The NPRM (notice of proposed rulemaking) could impose significant costs and business disruption including labor retention issues, exacerbating labor shortages, and creating significant legal compliance fees,” the association said in comments submitted to the agency.

The NAW’s full comments are available here.

The NAW was joined in submitting comments to the FTC by the U.S. Chamber of Commerce, which had collected feedback from a wide range of businesses and associations across the country. “Such a proposal fails to recognize that noncompete agreements can serve vital procompetitive business and individual interests — such as protecting investments in research and development, promoting workforce training, and reducing free-riding — that cannot be adequately protected through other mechanisms such as trade-secret suits or nondisclosure agreements,” the chamber said in a letter to the commission.

The Chamber argued the commission should withdraw its proposed rule for three reasons:

• The FTC is not authorized under the Federal Trade Commission Act to promulgate binding regulations related to “unfair methods of competition.”
• Noncompete agreements are not categorically “unfair,” as history and precedent demonstrate.
• The commission’s proposal would represent arbitrary and capricious decision-making in violation of the Administrative Procedure Act.

The U.S. Chamber’s complete letter is available here.

Political Power Shifts and Partisan Approaches Threaten Business Growth

Public companies are more concerned about policy risks today than a decade ago, according to a new report from the U.S. Chamber of Commerce.

The report found that S&P 500 companies' concerns over policy items such as changes in taxes, regulations and enforcement are 27 percent higher in 2021 than they were in 2011. The study looked at how often those companies referenced terms commonly associated with public policy risk in their 10-K filings with the SEC. The terms that saw the greatest percent increase in mentions were: “data privacy,” “immigration issues,” “labor,” and “intellectual property.”

“The data show what business leaders tell us every day — rising public policy risks threaten business growth and innovation and our country’s global competitiveness,” U.S. Chamber President and CEO Suzanne Clark said. “In Washington, the polarization, gridlock, regulatory overreach, and inability to act smartly and strategically for our future are making it harder for businesses to do their jobs and move this country forward.”

The U.S. Chamber attributed the drivers behind the rising concern over public policy risk to the frequent shifts in political power in Washington D.C., an increasingly partisan approach to lawmaking, and a growing willingness by both major political parties to pursue “aggressive policy changes through regulation.”

“Companies of all sizes face increasing headwinds from Washington and those risks are diversifying and intensifying,” U.S. Chamber Executive Vice President and Chief Policy Officer Neil Bradley said. “This report confirms what we have been hearing from our member companies about the growing threat of government overreach and the risk it poses to their businesses.”

The full report is available here.

National Restaurant Association Urges FTC to Abandon Plan to Prohibit Non-Competes

The National Restaurant Association and the Restaurant Law Center have submitted comments to the Federal Trade Commission (FTC) asking it to withdraw its proposed rule that would prohibit nearly all types of non-compete clauses and agreements.

In the comments, the organizations contend the proposed rule would likely have unanticipated consequences that could harm employees and consumers in the restaurant industry and could reduce competition rather than increase it. The comments were based on three grounds:

• Restaurant owners use non-competes sparingly with senior-level employees to protect confidential information. The proposed change is unnecessary and counterproductive because restaurant owners do not typically use them with restaurant managers or hourly employees.
• The commission lacks clear Congressional authorization to ban or regulate non-compete agreements, which would be required for a commission’s notice of proposal on rule making on non-competes.
• The regulation of non-compete clauses has been a state law issue for over 200 years. 

Additionally, the association and law center clarified that when restaurant employees are asked to sign a non-compete agreement it is in exchange for agreed-upon considerations such as long-term incentives, discretionary bonuses, promotions or generous separation packages.

“While the public face of the restaurant industry may be the many wait staff, hostesses, bartenders, line cooks, dishwashers, and others who provide the backbone of an operation, restaurant owners almost never use non-competes with these types of employees,” said Jordan Heiliczer, director of labor and workforce policy at the National Restaurant Association. “In fact, it’s not uncommon for hourly employees to move between jobs at two competing restaurant brands, all with the knowledge of their restaurant employers.”

The complete comments from the National Association and Restaurant Law Center are available here.