Letter to Connecticut General Assembly Regarding HB 6594 (Non Compete Clauses)

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Office of Policy Planning
February 10, 2023
VIA ELECTRONIC MAIL
Sen. Julie Kushner
Rep. Manny Sanchez
Sen. Rob Sampson
Rep. Tim Ackert
Sen. Jorge Cabrera
Rep. Derell Wilson
Connecticut General Assembly
State Capitol, 210 Capitol Ave.
Hartford, CT 06106
Re: Connecticut’s Proposed Bill on Non-Compete Clauses
Dear Sen. Kushner, Rep. Sanchez, Sen. Sampson, Rep. Ackert, Sen. Cabrera, and Rep.
Wilson:
I write this letter as the head of the FTC’s Office of Policy Planning, the FTC office that
provides advocacies and submits filings supporting competition and consumer protection
principles to state legislatures, regulatory boards, and officials.
We understand that the Connecticut General Assembly is considering a bill to restrict the
use of non-compete clauses in employment. On January 5, 2023, the FTC proposed a rule
banning non-compete clauses in employment at all wage levels. In doing so, the FTC
made several preliminary findings that the General Assembly may find informative as
you consider this bill. That notice of proposed rulemaking (NPRM) is attached to this
letter.1
As the NPRM notes, nationwide, approximately one in five workers—or thirty million
Americans—are bound by non-compete clauses.2 In total, the FTC estimates that banning
non-compete clauses could increase workers’ earnings by approximately $250 to $296
1 The proposal and additional information are also available on our website at https://www.ftc.gov/legal-
library/browse/federal-register-notices/non-compete-clause-rulemaking, and in the Federal Register at Non-
Compete Clause Rule, 88 Fed. Reg. 3482 (proposed Jan. 19, 2023).
2 Non-Compete Clause Rule, 88 Fed. Reg. at 3485.
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billion per year.3 The FTC preliminarily concludes that because non-compete clauses
decrease mobility and competition in the labor market, these clauses lower wages for
both workers who are and are not subject to them.4 The FTC also made preliminary
findings that non-compete clauses harm innovation and prevent new businesses from
forming.5 The FTC’s proposed rule would both ban employers from entering into non-
compete clauses with their workers and require employers to rescind existing non-
compete clauses and notify workers that the clause is no longer in effect.6
There are several portions of the NPRM that the General Assembly may find particularly
informative.
• 	Evidence on the existing use of non-compete clauses in U.S. labor markets is set
forth on pages 3485-86 of the NPRM. The evidence shows that non-compete
clauses are used extensively, including for low-wage workers. One survey found
that 35% of workers without a bachelor’s degree and 33% of workers earning less
than $40,000 per year have worked under a non-compete clause at some point in
their lives. Another analysis of the same data found that 53% of workers covered
by non-compete clauses are hourly workers.7
• 	An extensive discussion of the literature, studies, and other evidence on the
effects of non-compete clauses is set forth on pages 3484-93 of the NPRM. Many
of these studies are further discussed as part of the FTC’s cost-benefit analysis on
pages 3522-30.
o 	Evidence that non-compete clauses reduce earnings for both workers who
are and who are not covered by non-compete clauses, as well as increase
racial and gender wage gaps, is set forth on pages 3486-88 and 3522-25 of
the NPRM.
o 	Evidence that non-compete clauses reduce workforce mobility and the
resulting effects is set forth on pages 3489-93, 3526-28, and 3529,
including the effects on consumer prices, access to talent, new business
formation, innovation, and training and other investments.
• 	The FTC preliminarily determines that non-compete clauses negatively affect
competition in the labor and products and services markets, as explained on pages
3500-02. It also preliminarily determines that non-compete clauses are
exploitative and coercive, both at the time of contracting and at departure, for all
workers except for senior executives, as explained on pages 3502-04.
• 	The FTC preliminarily determines that common justifications for non-compete
clauses, such as increasing incentives to invest in workers and trade secrets, do
3 Id. at 3501.
4 Id.
5 Id. at 3502.
6 Id. at 3483.
7 Id. at 3485.
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not outweigh their harms. That determination and alternatives to non-compete
clauses available to employers to protect their investments are discussed on pages
3504-08.
• 	The FTC explains each section of its proposed rule on pages 3508-16. In
particular, the FTC explains why it is proposing a categorical ban on non-compete
clauses, including for both low and high-wage workers, on pages 3512-13. The
proposed rule’s relation to state law is explained on page 3515.
• 	The FTC sets forth alternative proposals on pages 3516-21. It discusses the
advantages and disadvantages of a uniform rule versus differentiating between
categories of workers such as low and high-wage workers on pages 3518-19.
The comment period on the proposed rule is open until March 20, 2023. We have
received thousands of comments from members of the public thus far, which are publicly
available and searchable on Regulations.gov.8 Some of those commenters identify
themselves as Connecticut residents. We also welcome any and all members of the
Connecticut General Assembly to file comments on the proposed rule.
We hope that the research and analysis the FTC has undertaken concerning non-compete
clauses is valuable to you as you consider this bill.
Sincerely,
_______________________
Director
Office of Policy Planning
8 Public Comments, Non-Compete Clause Rule NPRM (Jan. 9, 2023), available at
https://www.regulations.gov/document/FTC-2023-0007-0001.
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