Attorney General Bonta Joins Multistate Coalition Supporting Federal Trade Commission’s Proposed Rule Limiting Non-Competes in Employment

OAKLAND — Attorney General Rob Bonta today co-led a multistate coalition in submitting comments supporting the Federal Trade Commission's (FTC) proposed rule to eliminate non-compete clauses in employment contracts in most circumstances. In a letter sent today to Federal Trade Commission Chair Lina Khan, Attorney General Bonta joined 17 states in supporting a federal rule limiting non-competes.

In January 2023, the FTC proposed the Non-Compete Clause Rule, which would bar employers from preventing workers from working for or starting a competing business after leaving a job. According to an analysis of U.S. national survey data from 2014, approximately 18 percent of labor force participants were bound by non-competes, and 38 percent had agreed to one in the past, usually because employers insisted on them and workers lacked a meaningful ability to negotiate otherwise. The proposed rule concludes that non-competes are an unfair method of competition that can depress worker wages, reduce racial and gender equality in workplaces, create legal hurdles for employees looking to grow their careers, and deter workers from challenging harmful business practices. Currently, the legality of such non-compete agreements is left to the states, creating confusion for workers and distorting labor markets that cover more than one state.

"Despite being prohibited in California, non-compete provisions are routinely included in employee contracts, including contracts for lower-wage workers. This can tremendously deter workers from pursuing new, and often better job opportunities," said Attorney General Bonta. "I strongly support limiting non-compete clauses on a national scale. It's time for the federal government to catch up and help put an end to anti-competitive practices that depress wages and hurt consumers. The proposed rule will promote robust and innovative job opportunities and encourage creativity and entrepreneurship, allowing individuals to reinvest in themselves and protect competition in the workforce."

Low and middle-wage workers would benefit the most from this proposed rule, with a high potential for wage increases and job mobility. The proposed rule would also promote gender and racial equity, as studies have found that non-compete clauses cause women and non-white workers to see earnings reductions two times greater than that experienced by white male workers. The states also note that eliminating non-competes would benefit businesses and the economy as a whole, as non-competes restrict entrepreneurship and start-up activity.

The states also argue that the rule will improve conditions in the healthcare industry, which is experiencing a nationwide healthcare worker shortage, especially among physicians and nurses. Non-competes are widely used in the healthcare industry and restrict the entry of healthcare workers into their employment market, which inflates prices and decreases wages. The multistate coalition supports the FTC's definition of "non-compete clause," keeping the Commission's broad definition of "worker," and urge the Commission to clarify that the proposed rule does not overtake similar laws at the state level that provide equal or greater protections.

Attorney General Bonta is committed to defending workers' rights, workplace safety, and California's fair and competitive labor market. Through the Worker Rights and Fair Labor Section, the Healthcare Rights and Access Section, and the Antitrust Law Section, Attorney General Bonta enforces California's laws to protect the welfare of California workers and legitimate businesses operating in the state. In November 2022, Attorney General Bonta joined 21 attorneys general in filing an amicus brief opposing McDonald's attempt to evade liability for past alleged efforts to stifle competition and undercut wages through the use of "no-poach" agreements. In March 2022, Attorney General Bonta issued an alert reminding employers and workers that non-compete agreements are not enforceable in California. Attorney General Bonta officially supports AB 1076, which would further protect employee rights by prohibiting non-compete agreements in an employee's contract, and including a requirement for employers to notify their employees about the existence of these provisions. This important bill also clarifies that civil actions can be brought under the Unfair Competition Law to enforce these requirements.

California workers who have been wrongly presented with, or have entered into, an unreasonable or overly restrictive non-compete agreement should report it immediately to the Attorney General's office at www.oag.ca.gov/report.

In filing the comment letter, Attorney General Bonta joined the attorneys general of Colorado, the District of Columbia, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, and Washington.

A copy of the federal comment letter to the FTC can be found here.