Business Organizations Seek Extension On Comment Period Deadline On FTC's Proposed Rule Banning

100 business organizations submitted a letter today requesting a 60 day extension on the March 20, 2023, comment period deadline on the FTC's proposed rule banning non-competes with employees and workers. The business organizations include organizations in manufacturing, commerce, retail, insurance, franchise, health care, technology, financial services, construction, and staffing.

In support of their request, the organizations stated the "regulated community should be given sufficient time to assess the potential consequences of the rulemaking and develop insightful comments for the Commission to consider."

"This rulemaking, as the FTC itself acknowledges, will impact a significant portion of the economy" and "[g]iven the breadth of the rule, a sufficient comment period is needed to ensure the regulated community can fully assess its effects," they wrote. The organizations' letter indicated that there are significant legal questions that must be addressed by commenters, including "is whether the Commission has the legal authority to issue such a rulemaking, the rule's potential preemption of the numerous state laws and regulations on this issue, and how such preemption will alter the regulated community's legal obligations."

The FTC has the authority to deny the request and it has denied requests with respect to other proposed FTC rules.

With the magnitude of the changes that would occur should the proposed non-compete ban rule go forward, the organizations' request, and the FTC's own discussion of proposed alternatives for discussion in the proposed rule making, we expect that the March 20, 2023, deadline will be extended.

To date, there are been over 9,000 comments on the proposed rule.

After the public comment ends, there is a mandatory 180-day notice period after the final version of the rule addressing comments received is issued.

The rule would be likely subject to significant legal challenges, particularly with the Supreme Court's skepticism of federal agencies' use of expanded authority without the clear direction of Congress. Litigation to enjoin the rule could be filed after the final version of the rule is issued, but before it takes effect, during the 180-day notice period.

The 60-day comment period provides an important opportunity for stakeholders to voice concerns about the FTC's proposed rule. We recommend that businesses consult with their legal counsel about the proposed impact if this rule goes into effect, as well as voicing their opinion to this proposed rule to ensure that they are heard. Please contact a Seyfarth Trade Secrets lawyer if you are interested in submitting a comment to the FTC.

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