Sports activities regulation could have a partial repair for FTC noncompete ban: Employment & Labor Insider

On January 5, the U.S. Federal Commerce Fee issued a proposed rule that, if applied, would ban practically all post-employment covenants to not compete between employers and workers. Jon Persky of our Boston Workplace supplied a preliminary evaluation of the proposed rule right here. Though any closing rule is nearly sure to be topic to judicial scrutiny, to the extent it survives, it’s worthwhile to contemplate how employers could adapt. 

The world of sports activities supplies one avenue for consideration.

Skilled sports activities leagues include particular person membership entities that function the league as a three way partnership. As a part of that operation, the golf equipment have a wide range of guidelines and buildings which might be restraints on the labor marketplace for gamers, together with drafts, wage caps, and free company restrictions. Restrictions like this amongst opponents would ordinarily be in violation of Part 1 of the Sherman Antitrust Act, which prohibits events from unreasonably restraining commerce in a specific market.

Nonetheless, by substantial litigation between the Nineteen Seventies and Nineties, the courts developed and clarified an exemption for multi-employer bargaining models just like the groups in sports activities leagues. Usually talking, the courts (together with the U.S. Supreme Courtroom) stated that so long as a restraint was the product of collective bargaining between an employer and a union representing the employer’s workers, the restraint couldn’t be challenged underneath antitrust regulation. This idea turned often known as the “non-statutory labor exemption” and underpins collective bargaining in skilled sports activities right this moment.

The aim of the non-statutory labor exemption is to offer primacy to the collective bargaining course of established by the Nationwide Labor Relations Act in resolving employer-employee disputes. As defined by the U.S. Courtroom of Appeals for the District of Columbia Circuit, “when federal labor coverage collides with federal antitrust coverage in a labor market organized round a collective bargaining relationship, antitrust coverage should give manner.”

The FTC’s proposed rule is grounded in antitrust coverage. The FTC argues that “using non-compete clauses by employers has negatively affected competitors in labor markets.” The validity of that assertion is nearly sure to be challenged within the courts.

But when the FTC’s view prevails, the rule could also be topic to the non-statutory labor exemption in the appropriate circumstances. Though union workers will not be usually the main target of restrictive covenants, each unionization and using restrictive covenants have been on the rise in recent times. Because of this, there could also be union workers in sure roles or industries the place employers would possibly wish to moderately prohibit their future employment. These employers would possibly have the ability to embody post-employment restrictive covenants of their collective bargaining agreements. 

Though the FTC is unlikely to agree, an employer in these circumstances would have at least a colorable argument that the non-statutory labor exemption utilized.

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