[bretthoerner]

My attorney friends tell me that the FTC doesn't really have the ability to do this, since contract law is part of state law. (My poor paraphrasing, not theirs.)

I've been surprised I haven't seen this mentioned on social media or in the news. Are my friends wrong, or are people celebrating because this is just a step in the right direction even if it may not do anything yet?

[JumpCrisscross]

> FTC doesn't really have the ability to do this, since contract law is part of state law

The federal government can absolutely regulate both employment and contract law. (Merger agreements are contracts. The FTC was established to block bad mergers.)

Whether the FTC can do this is untested. But that’s more a Chevron issue than a federal powers one.

[bdw5204]

Relying on a Chevron argument is not particularly wise given the pending Supreme Court cases Relentless Inc. v. Department of Commerce and Loper Bright Enterprises v. Raimondo where the Court is expected to overturn Chevron:

https://www.scotusblog.com/2024/01/supreme-court-likely-to-d...

[faeriechangling]

Yup, and the motivation is explicitly to go after unelected “administrative state” technocrats legislating by decree… such as through exactly what they’re doing here.

Unelected technocrats legislating by decree is the purview of the Supreme Court not the FTC, so sayeth the majority of current Supreme Court justices. I imagine a bunch of stuff is about to break since elected officials cannot pass jack shit in this hyper-partisan era.

[slotrans]

> The federal government can absolutely regulate both employment and contract law

Where in Article I Section 8 does the Constitution grant that power?

[dctoedt]

> Where in Article I Section 8 does the Constitution grant that power?

The Commerce Clause, when interpreted expansively — as federal courts have largely done. (We'll see what happens with the 6-3 conservative majority of this SCOTUS incarnation.)

[chrisco255]

They've actually gone through different eras of interpreting expansively or restrictively.

[bombcar]

The snarky answer would be the 13th amendment.

[timeflex]

Generally federal law will preempt state law. See the Court's decisions regarding California's attempt to ban arbitration agreements in employment contracts.

Now, that doesn't mean the Supreme Court won't come up with their own hot take, but at some point appeals and district courts are just going to say no when they send a case back.

What is the Supreme Court going to do? Federal judges can only be removed by impeachment of the House and conviction of the Senate. The Supreme Court has no power to enforce its decisions.

[HaZeust]

As Jackson quipped; "John Marshall has made his decision; now let him enforce it." We'll see where this goes, and if it's honored.

[Aloisius]

The quote is likely apocryphal.

There was nothing to enforce as the court didn't impose any obligations on Jackson.

[HaZeust]

Jackson was VERY vocal about his disapproval for the Marshall Supreme Court.

The obligations imposed by the ruling within Worcester v. Georgia was that states (specifically Georgia) could not enact and enforce regulations on Reservations and Native American land because of pre-existing treaties. It was never claimed that the quote is about what decisions were made with regards to Jackson; it was about what decisions were made for Georgia, and that Jackson had no intent to enforce them.

Jackson was very much complacent to Georgia's continued intent to regulate, and later remove, Native Americans from their designated land.

[banish-m4]

The odds of the conservative activism SCOTUS siding with employees and COTUS (bought off by corporate lobbyists) passing a worker-friendly prohibition on noncompetes are both zero. OTOH, it's not outside the realm of possibility that COTUS might pass a federal law superseding laws in California, Colorado, Illinois, Oregon, Nevada, Washington state, and Washington DC to roll back states rights favoring workers. Similar state bills in NY and NJ died in committee in 2022.

[oceanplexian]

There is widespread bipartisan support for noncompetes. NY, a bastion of liberal politics still overwhelmingly refuses to make noncompetes illegal.

[toomuchtodo]

> There is widespread bipartisan support for noncompetes. NY, a bastion of liberal politics still overwhelmingly refuses to make noncompetes illegal.

NY Governor Hochul vetoed it because she is a hack politician and yielded to Wall Street pressure. Politicians with a spine (or constitution, if you prefer) are in short supply.

https://apnews.com/article/noncompete-agreement-bill-veto-ne...

> But in recent months, the legislation had come under fierce attack by Wall Street and top business groups in New York. They argued the agreements are necessary to protect investment strategies and keep highly-paid workers from leaving their companies with prized inside information and working for an industry rival.

[banish-m4]

That's the rule rather than the exception in the US as politicians go. Campaign finance reform failed because most (not all) politicians are indeed crooks who accept gold bars from foreign governments, embezzle from their campaign to buy luxury goods, or pay hush money to porn stars.

Let me refer you to George Carlin's approach: https://youtu.be/xIraCchPDhk

[banish-m4]

> There is widespread bipartisan support

At which level(s), or do you mean voters? Voter sentiment has essentially no bearing on public policy, and it was even proven with data in a Princeton study confirming what we already knew. [0]

If I might quote Gore Vidal: There is only one party in the United States, the Property Party … and it has two right wings: Republican and Democrat. Republicans are a bit stupider, more rigid, more doctrinaire in their laissez-faire capitalism than the Democrats, who are cuter, prettier, a bit more corrupt — until recently … and more willing than the Republicans to make small adjustments when the poor, the black, the anti-imperialists get out of hand. But, essentially, there is no difference between the two parties.

Partisanship tribalism is a divide-and-conquer gambit that has been largely successful in keeping Americans fighting each other counterproductively and voting against their own interests.

0. https://www.cambridge.org/core/journals/perspectives-on-poli...

[oceanplexian]

Chances are extremely high that the current Supreme Court nullifies or greatly restricts Chevron. These kind of announcements are fuel for the fire and are likely to accelerate its demise.

They will kill this faster than they killed the COVID vaccine mandate. Govt. agencies can’t make laws, even if we may agree with them (I actually do in this case). However this isn’t the role of an unelected government agency.

[xpe]

> Govt. agencies can’t make laws

This is an unfortunately common response that often misses the point: U.S. government agencies do indeed have the power to make decisions with the force of law. Rule-making is a valid authority (subject to legal review of course)

[adastra22]

There are two cases in the Supreme Court right now that are expected to rule on this, overturning the ability for regulatory authorities to make rules covering things not explicitly stated in law.

[xpe]

I'm not familiar with those cases, but it seems to me that if such rules go in favor of "agencies only get to clarify where explicitly allowed" then there will a lot of undesirable consequences. Assuming legal ambiguities remain, with less administrative power, there will be less clarity! Less clarify on application, administration, and enforcement.

Perhaps the courts will have to step in clarify? But this won't solve the administrative issue. If agencies don't have "agency" to do their jobs well, that would be ironic.[1] Perhaps Congress will be motivated to write better laws?[2]

[1] I'm deeply suspicious of efforts to undermine agencies under the cover of "only Congress makes law"... I suspect is it often a guise of undermining the laws one party does not like. Or, sometimes, even as an effort to undermine the idea of regulation at all. The latter point is hardly hidden -- it is central to a lot of right-leaning rhetoric which seems to boil down to "regulation bad, freedom good". This level of reasoning would have Milton Friedman rolling in his grave, as some regulation _provably_ helps reduce market failures. (And even center-left people typically want markets to work well.) But I digress.

[2] Hah. The idea that we would give Congresspeople and their staff even more responsibility to specify laws _without_ an associated increase in their competence for those areas where the law applies strikes me as foolhardy.

[adastra22]

It’s called Chevron deference / doctrine, and yes the consequences would be far reaching. Whether the net benefit is good or bad is largely a subjective matter of political opinion.

[xpe]

It is wise to look at an argument with extra caution when you see the phrase “unelected government agency”.

There are (of course) valid powers available to agencies. The question is what powers are valid.

Beware the dark arts of rhetoric. I’m familiar with spotting this one because my constitutional law professor used it often. He helped us to see right through it.

Logic and argumentation should win, not words designed to scare or muddle.

Intellectually honest comments reveal their fundamental guiding moral and political philosophies, rather than painting a one sided picture.

Edits done as of 6:30 pm eastern time.

[jameshart]

Indeed. Government agencies are overseen by officers of the United States, appointed by the president with the advice and consent of the senate, typically to terms greater than the length of either a presidential to senate term.

Just like Judges.

The idea that courts are the only delegates of the elected representatives of the people who are allowed to figure out the nuances of how to carry out the democratically legislated responsibilities of government is a bit of a brainworm that has infected US politics and makes the Supreme Court a little too important.

[mminer237]

The Supreme Court often dismisses cases for the entire reason that constitutionally it can't make laws. That's Congress's job. It's fair to be critical of how much Congress can punt its responsibility to a 4th branch of government with little oversight.

[jameshart]

Kicking back a law because it's constitutionally not the business of government to have laws that say that, is very different than kicking back a law because while it is something upon which legislation could constitutionally be had, and the executive is acting in accordance with the law as written, the judiciary doesn't like the way in which the legislature chose to phrase how it delegated authority... that's a different story.

Executive agencies aren't a "fourth branch of government with little oversight", they're article II section 2 'departments' of the executive, established by law, and controlled by the president and appointed officers, with as much oversight as congress legislates to require, plus accountability to the courts for remaining within the bounds of their legal and constitutional authority.

[oceanplexian]

It’s not really a brainworm, it’s the fact that people see the government in radically different ways.

My view is that as long as there’s genuine consent, two parties agree to something, no one is coerced, both are of sound mind, two human beings should be able to enter into any contract you can imagine. It doesn’t matter if that’s Gay Marriage or a firearms transaction.

The role of government should only be to ensure that that both parties engaged fairly. The minute you want to start using the government to ban one thing or another based on some moral imperative, is the minute you stopped respecting the autonomy of other people and decided to force your morality on another through collective force.

[ihumanable]

> no one is coerced

How do you square that up though with the power differential in employer / employee relations? The employee has to work or be destitute. That gives employers a tremendous amount of power in any contract negotiation.

Coercion doesn't have to be a gun to your head. Every person in the workforce is under a pretty coercive force which is that without gainful employment you are going to go without housing, medicine, transportation, etc. Without any collusion on the part of the employers, the market works to select those employers who can create the contract conditions most favorable to profit production. We shouldn't be surprised that "favorable to profit production" and "disadvantaging the worker" are often closely aligned, every company would like to pay as little as possible for their input and get as much profit as possible out of their outputs. Labor, or Human Resource, as corporations like to call it, is an input and so there's a tremendous systemic pressure to craft contracts in the way that will get the maximum profit out of every employee.

Sure the employee didn't have to sign that unfair employment contract, they could have elected to sign one of hundreds of unfair employment contracts. The fact that they have a large variety of unfair contracts to select from doesn't on its own increase the fairness of the contract. The "collective force" of "you need money to operate in society" means that all workers are coerced to sign "the best deal they can get" which doesn't mean it's going to be a good deal or a fair deal for the worker, just the best that the market has.

[xpe]

The world consists of more than two people. It isn't just about them. Am I misunderstanding your point?

Many individuals care about society as a useful construct -- a construct that is not easily calculable from individual utilities. [1] This would suggest that even utilitarians should care about society -- unless they think they get to define what matters to their precious individuals. [2]

[1] Sure, one can say society is _causally_ derived from individual actions, but... (1) the derivation of what society looks like is not predictable enough for the time scales we care about; (2) individuals are influenced by society, as a matter of perception

[2] If I may attempt some satire, I wouldn't at all be surprised if some utilitarians are a sort of "mini-autocrat" at heart -- in the sense they get to decide what counts in every individual's utility function. e.g. "I value you, individuals!, yes I do!... but I get to tell you what really matters for your happiness! and after I do that I decree that the summation operator is how we put it all together!"

[oceanplexian]

There’s not a better, more compact way to explain the problem. Congress, when they delegated powers to the FTC, did not envision them banning private non-compete agreements. It’s a non-trivial issue. Lawmakers weren’t stupid, non-competes existed at the time they formed the FTC. They had the power, the knowledge, and the intelligence to draft a law. They did not.

The burden of proof is on the Government to prove that Congress explicitly intended the agency to regulate this part of contract law. Like I said before, I personally support banning non-competes. But it has to be done legally. It has to be done within the constraints of a system of laws.

[Buttons840]

Ask your attorney friends if a farmer growing food on their own land to feed to their own animals is "interstate commerce", and ask them to explain that to you.

What I'm referring to here is Wickard v Filburn in which the Supreme Court ruled that a farmer growing food on his own land to feed to his own animals was participating in "interstate commerce" and could thus be regulated by the federal government.

This is a big part of why the federal government can control things like which plants you are allowed to grow in your home.

But when the FTC tries to regulate something like non-competes and protect average workers the corporate attorneys come out of the woodwork, "oh no, the federal government can't do that!"

[mike_hearn]

Is it the same people? It seems like the current Supreme Court is very much against decisions like the weird farmer one and likely to roll such things back.

[cryptonector]

During the Federalist Revolution period of the the 90s, before Scalia got spooked by drug legalization, the court was definitely heading in the direction of reversing Wickard. Perhaps now that the court is willing to reverse big cases like Roe and Chevron (so it seems) it will also be willing to reverse Wickard.

[modeless]

The difference here is that Congress isn't banning noncompetes. The FTC is doing it. Different branch of government.

[nojito]

Congress established the FTC.

[mminer237]

People seem a bit confused. There are a few separate legal questions here:

1. Whether Congress can ban noncompetes nationwide through its ability to regulate interstate commerce.

2. Whether Congress can say "so-and-so can make any laws he wants about x".

3. Whether this is in scope of the FTC's mission of preventing unfair trade practices.

To me, #1 is a clear no for intrastate agreements, but under Wickard it is constitutional.

#2 is yes under Chevron.

#3 seems an obvious yes.

The only question would be if SCOTUS decides now is the time to correct what it sees as prior incorrect decisions.

[cryptonector]

The SCOTUS likes to decide things on the narrowest possible grounds. That means that if it wanted to reverse this rule it would want to find grounds relating to (3), which as you note it probably could not.

The court could still decide that this rule is a "major powers question" and so belongs to Congress. This would allow the court to not have to reach any question of whether the FTC has broad powers, whether the act that created the FTC is constitutional, or whether Wickard was correctly decided. Therefore it seems more likely that the court would do that -again, if it wanted to reverse the FTC here- than anything else.

Can you imagine if the court ruled the FTC to be unconstitutionally created? They wouldn't risk that chaos.

[mminer237]

Yeah, regardless of how the justices feel about this, I can't imagine them striking it down for the reasons you describe.

[modeless]

Congress established many parts of the executive branch. Nevertheless they remain part of the executive branch, a separate branch of government from Congress, and this distinction is legally important.

[unyttigfjelltol]

Your friend may recall that the FTC occasionally acts against "deceptive" conduct in the marketplace. If you read the relevant law, it also can act against "unfair" conduct.[1] Sometimes people forget there are two words there separated by "or".

This would be an example of an "unfair" practice, which mostly are about predation in the context of unequal bargaining position when litigated under "Little FTC Acts"[2]. I don't know offhand whether these similar laws have been used to achieve the same thing state-by-state, but the FTC rule meets the straight face test for sure. So, regardless of what happens next at the Federal level, this is about to become a white-hot area of litigation under state "Little FTC Acts".

[1] https://www.law.cornell.edu/uscode/text/15/57a

[2] https://litigationcommentary.org/2021/06/15/a-fresh-look-at-...

[aidenn0]

It is both true that the FTC's mandate is broad enough to include this and that this might get successfully challenged in the courts.

[relaxing]

Interstate commerce is broadly recognized to include just about anything.

[mbreese]

Where I am, I know people who are under noncompetes that have a geographical clause. You can’t leave to join a competitor within X miles. In my part of the country, that would include at least three states (maybe more), but other locations would include many more.

So, yeah, seems like at least those non-competes impacts interstate commerce.

[kube-system]

You're conflating two different things.

The reason those geographical clauses are in those contracts is because many states have ruled that non-competes are illegal unless they are limited in some ways to be "reasonable", and one common way states courts measure this is by ensuring that they are limited to something that might be a reasonable 'business area' that the company competes in. Corporate lawyers typically write in the exact radius that state courts have historically enforced into their non-competes to avoid them being disqualified for being too broad.

"Interstate commerce" on the other hand, just means any sort of business activity that crosses state lines. Basically every business engages in interstate commerce, just because commerce requires many interstate activities, like using the internet, or accepting electronic payments, or ordering supplies made in a different state.

[mbreese]

No, I’m not conflating them. I do appreciate why they are written with geographical clauses, but I have always found it odd (and probably unenforceable).

I’m just saying that non-competes like this should be regulated under Federal authority because they explicitly cover geographic areas that include multiple states. That’s in addition to the impacts on “interstate commerce” proper (which as you said is basically all commerce).

Said another way: I find the argument that non-competes should be allowed or disallowed under the authority of only state laws to be lacking. If a contract in state A dictates what you can do in state B, it’s an interstate issue and Federal law could (should?) be involved.

[kube-system]

I think you're putting the cart before the horse. First of all, basically any company with a noncompete clause is already doing significant interstate commerce. And if a company is arguing that a neighboring state is within their area of competition, they're implying the same.

And regardless, federal power to regulate commerce hinges on actual interstate commerce taking place. A contract between two entities in one state, under the laws of that one state, that merely mentions another state, isn't interstate commerce.

[jameshart]

If a noncompete agreement between a former employer, and a person who resides in a particular state, purports to prevent that person from taking up an employment contract with another employer - including by one who is located in a different state… well that seems like that could be an unfair restraint on interstate commerce.

[SkyBelow]

If growing food for your own use is interstate commerce, contract law is interstate commerce.

[yieldcrv]

The federal government has the constitutional right to regulate interstate commerce, and 100 years ago it discovered that all commerce is now interstate commerce, followed by the supremacy clause which is selectively applied (ie. not for scheduled drugs, but for everything else)

This Supreme Court could be friendly to invalidating that expansive interpretation though

so, big mismatch from the executive branch / agencies with the judicial branch which could completely warp our relationship with the Federal Government and what we find familiar in our way of life

But I dont think its as simple as saying “contract law is part of state law”

[timeflex]

The Supreme Court doesn't have any power to enforce its decisions. District and Appeals Courts could just say no to their decisions and there isn't much they can do.

[cryptonector]

When district and appeals courts do what they like, the SCOTUS can reverse every one of their decisions. The inferior courts can then go on a spree of incorrectly deciding every relevant case and delay the final judgement by years, but then the SCOTUS could just speed up its process of reversing every such decision by the inferior courts. The SCOTUS also has options for removing judges from certain types of cases, IIRC. It's a game that the SCOTUS invariably wins in the end -- unless it gets packed.

[timeflex]

There has been times in the past where the other branches ignored the Supreme Courts rulings. They cannot call out troops. The only people that give them power are the other branches that enforce those rulings, but they could decide not to.

[Gormo]

I think if we got to the point that we could not rely on Supreme Court rulings being upheld without the mobilization of troops, we will already be in a situation of fundamental institutional collapse anyway, and questions of constitutionality and legality of anything will become moot as we descend into a raw state of nature.

[cryptonector]

Yes, this is true, but within the judicial branch itself, the SCOTUS does have a fair bit of power.

[Animats]

> The Supreme Court doesn't have any power to enforce its decisions.

Sure it does. US Marshals are the muscle of the court system. They enforce federal court orders when necessary.

[xpe]

I’m not a constitutional scholar, but I’ll say this —- there’s a reason this one is debated. It seems to me (with around 70% probability) that there are many possible constructions that could emerge which would more or less conform to the (rather contingent) bar for Supreme Court decisions.

I say contingent because the history of the Supreme Court is far from a deductive process of pure interpretation.

I recognize the utility of the Supreme Court while dismissing any grandiose claims of objective morality or obvious legality. It is a body of people after all.

[BWStearns]

Options are also contracts and the FTC seems to have succeeded in regulating those.

[fallingknife]

That's the CFTC

[BWStearns]

Oops you are correct! Broader point still there that federal regulators can regulate contracts though.

[yieldcrv]

the FTC regulates options?

it seems like thats a mixture of the SEC and IRS

[JumpCrisscross]

CFTC regulates commodities-based options, the SEC securities-based ones. The FTC and IRS are not proximately relevant.

[yieldcrv]

I was charitably hoping they were referring to employee stock options where their existence is primarily due to tax regulations of granting RSUs of illiquid company shares, hence IRS

but yes, not at all relevant

its hard for me to understand why people get the agency acronyms mixed up and interchanged. I can sort of see it, but I’ve just never seen people be so confidently wrong outside of perhaps the eastern medicine crowd.

[robertlagrant]

It may have the ability to, but it's not really anything to do with trade.

[xbar]

It is a good question. I am glad that the FTC is testing it.

[hnburnsy]

Not agreeing, but just posting the other side of the argument from the US Chamber of Commerce. Not a fan of legislation by fiat, maybe this will prompt Congress to do something. USCoC said they will sue...

https://www.uschamber.com/finance/antitrust/chamber-comments...

>The Chamber and its membership are strongly opposed to the Proposed Rule. It would categorically ban nearly all noncompete agreements—regardless of individual circumstances, such as a worker’s skill, job responsibilities, access to competitively sensitive and proprietary information, bargaining power, or compensation—and require that organizations rescind all existing agreements and provide notice to affected workers of such rescission. 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. For centuries, courts have recognized the procompetitive benefits of noncompete agreements and balanced those benefits against any negative costs imposed by particular noncompete agreements. As perhaps acknowledged by the Commission’s request for comments on narrower alternatives, the Commission’s categorical ban would sweep in millions of noncompete agreements that pose no harm to competition, and in fact benefit the U.S. business community, economy, workers, and consumers.

https://www.uschamber.com/finance/antitrust/u-s-chamber-to-s...

>The Chamber will sue the FTC to block this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked.