Hannah Garden-Monheit Letter to Connecticut Legislature Regarding SB 354

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Office of Policy Planning
January 14, 2025
VIA ELECTRONIC MAIL§
The Honorable Rob Sampson
Senator
The Connecticut Senate
Re: S.B. 354
Dear Senator Sampson:
I write this letter as the Director of the Federal Trade Commission’s (“FTC”) 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.
I understand that the Connecticut legislature is considering S.B. 354 (“the Bill”) that,
among other things, would repeal several of the state’s existing restrictions on noncompete
provisions. On April 23, 2024, the Commission approved a final rule under the FTC Act
banning noncompete clauses because of the many harms that they cause to workers and the
benefits that would arise from a ban. 1
0F
I write to highlight a number of the Commission’s evidentiary findings of the harmful
effects of noncompetes that you may find informative as you consider the Bill. The rule and
other materials that you may find helpful—including a summary, fact sheet, and compliance
guide—are posted on the FTC website. 2
1F
Many Americans have experienced the harmful effects of noncompetes and support
banning them. After the Commission proposed to ban noncompetes, the Commission
received more than 26,000 comments. Of those, approximately 25,000 favored a
categorical ban. 3
2F Many workers described how noncompetes blocked them from taking a
better job, negotiating better pay, or starting a business. Many entrepreneurs and small
businesses also described how noncompetes prevented them from starting a business or
1 Non-Compete Clause Rule, 89 Fed. Reg. 38342 (May 7, 2024) (to be codified at 16 C.F.R. part 910),
https://www.federalregister.gov/documents/2024/05/07/2024-09171/non-compete-clause-rule. The rule has
not come into effect at this time, because a Texas district court issued an order stopping the FTC from
enforcing the rule. The FTC has appealed that decision. The district court’s decision does not prevent the FTC
from addressing noncompetes through case-by-case enforcement actions.
2 FTC, Noncompete Rule, https://www.ftc.gov/legal-library/browse/rules/noncompete-rule.
3 89 Fed Reg. at 38344.
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4 Id. at 38344-45, 38389-94.
5 The comments are available and searchable by state at Regulations.gov,
https://www.regulations.gov/document/FTC-2023-0007-0001/comment.
6 89 Fed. Reg. at 38343, 38346.
7 Id. at 38346.
8 Id.
9 Id. at 38374-79.
10 The Commission assessed the numerous empirical studies that have been conducted on noncompetes and
explained the weight it gave to each study. See id. at 38374-424; see also id. at 38372-74 (explaining the
Commission’s analytical framework for assessing the empirical evidence).
11 See id. at 38382-87.
12 Id. at 38469-70, 38474, 38505-06 (App., Table A1).
13 See id. at 38388-402.
14 See id. at 38433, 38485; FTC, Noncompete Rule, https://www.ftc.gov/legal-
library/browse/rules/noncompete-rule.
15 This reflects an estimated increase of about 3,000 to 5,000 new patents in the first year noncompetes are
banned, rising to about 30,000-53,000 in the tenth year. See 89 Fed. Reg. 38476.
16 Id. at 38380, 38408.
hiring qualified workers. 4
3F Many of the comments were from workers, businesses, and
others in Connecticut. You can find such comments on the FTC’s public docket at
Regulations.gov. 5
4F
The evidence shows that noncompetes are used extensively, including even for low-wage
workers. The Commission found that nationwide, approximately one in five workers—or
thirty million Americans—are bound by noncompetes. 6
5F 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 noncompete at some point in their lives. 7
6F Another analysis of the
same data found that 53% of workers covered by noncompetes are hourly workers. 8
7F
Noncompetes restrict workers’ fundamental freedom to leave for a better job or to start their
own business. Based on empirical research and public comments, the Commission found
that noncompetes are exploitative and coercive for all workers except for senior executives.
For almost all workers, non-competes are unilaterally imposed, typically without
negotiation or compensation, and force workers to remain in jobs and bear significant
harms and costs. 9
8F
Based on the extensive empirical evidence, the Commission found that noncompetes tend
to negatively affect competitive conditions in both labor and product and service markets. 10	
9F
The Commission found that because noncompetes decrease mobility and competition in the
labor market, they suppress wages not only for the workers subject to them, but also for
workers who are not subject to them. 11	
1 0F The Commission estimates that its rule would
increase workers’ earnings by $400-$488 billion over the next decade, and an average
worker would earn $524 more per year. 12	
11 F
The Commission further found that noncompetes negatively affect competitive conditions
in markets for products and services, inhibiting new business formation, decreasing
innovation, and raising prices. 13	
1 2F The Commission estimates that its rule would increase
new business formation by 2.7%, creating over 8,500 new businesses each year. 14	
13 F
Innovation would also increase, leading to about 17,000-29,000 new patents each year on
average. 15	
14F Through increased competition and innovation, consumers would have access to
better products and lower prices. 16	
1 5F For example, the Commission estimates that the rule
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would reduce health care costs by $74-$194 billion over the next decade in reduced
spending on physician services. 17	
1 6F
In adopting the rule, the Commission assessed employers’ claimed justifications for
noncompetes and found that employers have several viable alternatives that do not impose
the same burdens on competition. 18	
17F The Commission found that employers can use trade
secret law and reasonable non-disclosure agreements to protect legitimate intellectual
property interests. 19	
18 F Roughly 95% of workers with noncompetes are already subject to non-
disclosure agreements. 20	
19F The Commission also found that employers can protect their
investments in worker human capital, including training, by entering into fixed duration
employment contracts. 21	
20 F They can also compete on the merits to retain workers by offering
higher wages and better jobs. 22	
21 F
I hope that the Commission’s research, analysis, and evidentiary findings concerning
noncompetes are valuable to you as you consider S.B. 354. Please do not hesitate to reach
out if my office can be of further assistance.
Sincerely,
Hannah Garden-Monheit
Hannah Garden-Monheit
Director
Office of Policy Planning
17 Id. at 38470, 38478.
18 See id. at 38421-34.
19 Id. at 38424-26.
20 See id. at 38426 (citing Natarajan Balasubramanian, Evan Starr, & Shotaro Yamaguchi, Employment
Restrictions on Resource Transferability and Value Appropriation from Employees (Jan. 18, 2024),
https://papers.ssrn.com/sol3/papers.cfin?abstract_id=3814403).
21 89 Fed. Reg. at 38426.
22 Id.
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