Letter from Federal Trade Commission's Office of Policy Planning re: S3100A

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Office of Policy Planning
November 28, 2023
VIA ELECTRONIC MAIL
The Honorable Kathy Hochul
Governor of New York State
NYS State Capitol Building
Albany, NY 12224
Re: New York’s Bill on Non-Compete Clauses
Dear Governor Hochul:
I write this letter as a Deputy Director 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 your office is considering a bill that passed the NY State Senate and
State Assembly, S3100A and A1278B, to restrict the use of non-compete clauses in
employment. As referenced in the justifications for S3100A, the FTC proposed a rule in
January of 2023 banning non-compete clauses in employment at all wage levels. In doing
so, the FTC made several preliminary findings that you 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
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-
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.
3 Id. at 3501.
4 Id.
5 Id. at 3502.
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

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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compete clauses and notify workers that the clause is no longer in effect.6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 you may find particularly informative.
• 	Evidence on the existing use of non-compete clauses in the U.S. 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, 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 NPRM considers the common justifications put forward for non-compete
clauses, including increasing incentives to invest in workers and protecting trade
secrets, and preliminarily concludes nevertheless that non-compete clauses are
unlawful. The discussion of justifications commonly raised for non-compete
clauses as well as alternatives to non-compete clauses available to employers to
protect their investments is 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
6 Id. at 3483.
7 Id. at 3485.

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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 closed on April 19, 2023. We received more
than 21,000 comments from members of the public, which are publicly available and
searchable on Regulations.gov.8 Some of those commenters identify themselves as New
York residents, businesses, and New York-based organizations. We also received a joint
comment from New York’s Attorney General and the Attorneys General of several other
states.9
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,
_______________________
Sarah Mackey-Barr
Deputy Director
Office of Policy Planning
cc: 	New York State Senator Sean M. Ryan
8 Public Comments, Non-Compete Clause Rule NPRM (Jan. 9, 2023), available at
https://www.regulations.gov/document/FTC-2023-0007-0001.
9 Comment, FTC-2023-0007-21043 (April 19, 2023), at https://www.regulations.gov/comment/FTC-2023-
0007-21043.