Non-compete reform is the clearest issue we’ve worked on where lawyers and economists need each other and where, working together, they’ve been able to achieve real impact.
Catherine Lyons
Director of Policy at Economic Innovation Group
Since the Obama administration’s Call to Action in 2016, noncompete reform has been a hot-button issue. Several states have since enacted legislation limiting employers’ ability to enforce these agreements, especially with low-wage workers. Recently, the FTC announced a proposed rule to ban all employment-related noncompete clauses on January 5, 2023, based on its preliminary finding that employers’ use of noncompetes constitutes an unfair method of competition.
Workplace law professors Rachel Arnow-Richman, Jonathan Harris and Orly Lobel have been working closely with legislators, economists, and policy organizations to advance the noncompete reform agenda. Professor Rachel Arnow-Richman, Director of Converge for Impact and the Rosenthal Chair of Labor & Employment Law at University of Florida Levin College of Law, describes the impact of the FTC’s rule proposal as a capstone event following a decade of advocacy and reform, which brought law professors, policy advisors, economists, and lawmakers into what has become an ongoing dialogue.
“Legal academics and economists have been in continued conversation with lawmakers and policy groups during the recent wave of reform that has now culminated in the FTC’s proposed rule.”
Professor Rachel Arnow-Richman, the inaugural Gerald A. Rosenthal Chair in Labor & Employment Law
Among the highlights for her was serving on the Uniform Law Commission (ULC) committee that drafted the recently adopted Uniform Restrictive Employment Agreements Act. “It was a wonderfully iterative process,” Professor Arnow-Richman said. The committee consisted primarily of practitioners from both employee- and employer-side practices as well as lawyers from other fields and a handful of academics, she explained. “I was impressed with the care and thought that went into the drafting. For me, it really illustrated the benefits of collaboration.” Professor Arnow-Richman has also consulted or provided testimony on several state legislative initiatives, including bills in California and Connecticut and recently passed legislation in Colorado.
Since the FTC’s proposed rule, focus has shifted to preparing responsive comments. Professor Arnow-Richman praised the non-profit policy organizations Economic Innovation Group (EIG) and the Open Markets Institute, who have long worked for noncompete reform at the federal level. In addition to their on-the-ground advocacy, she noted how much these groups have done to foster communication. “There is a true community of scholars and advocates working together on this issue.”
Catherine Lyons, Director of Policy and Coalitions at (EIG), agrees. Ms. Lyons has worked to bring policymakers, legal experts and economists to the the table in support of the FTC ban, as well as the recently reintroduced federal Workforce Mobility Act that would similarly restrict the use of noncompetes. Ms. Lyons notes how important it has been for these constituencies to educate one another. Economists in particular “have been on a learning journey.” Initially in support of the use of noncompetes, economists have shifted toward favoring reform based on empirical research demonstrating how such instruments adversely affect workers and the economy. “Lawyers and law professors have helped on this journey,” she explains, “[by] pointing out where bargaining power is out of balance and informing economists about the process and qualitative aspects of non-competes in practice that contribute to their harmful effects.”