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February 28, 2023
The Greater Boston Chamber of Commerce (the “Greater Boston Chamber”) submits these
comments in response to the Notice of Proposed Rulemaking (the “NPRM”) issued by the Federal
Trade Commission (“FTC” or the “Commission”) to amend 16 CFR Part 910 and published in the
Federal Register on January 19, 2023. The Greater Boston Chamber is concerned about, and is opposed to, the NPRM.
Background Regarding the Greater Boston Chamber
The Greater Boston Chamber represents the collective voice of the business community in
Massachusetts. With 1,300 members in virtually every industry, including manufacturing, life
sciences, retail, insurance, construction, and finance, the Greater Boston Chamber advocates on
behalf of its members for public policies that ensure all businesses and all people can thrive in
Massachusetts. As part of this mission, the Greater Boston Chamber regularly engages public
officials on matters that impact employers, including discussions about the proper role of
noncompetes in employment relationships and their impacts on both employers and employees.
Nearly all of the Greater Boston Chamber’s members would qualify as “employers” under the
NPRM and therefore stand to be affected by it. After a thorough public debate, the Greater Boston
Chamber believes that Massachusetts struck the right balance in allowing the use of noncompetes
by employers, but also protecting those most vulnerable from abuse or unnecessary restrictions.
The NPRM Would Infringe on the States’ Roles as “Laboratories of Democracy”
As described in greater detail below, in 2018, following almost a decade of deliberation and vigorous debate, the Massachusetts legislature enacted comprehensive noncompete legislation that both codified the right of employers to use and enforce noncompetes in appropriate circumstances, and included protections for the types of workers that the Commission seeks to protect under the NPRM. The long and circuitous path to this compromise legislation began with two competing proposals in 2009, one of which would have banned noncompetes outright, as the NPRM seeks to do. Yet after hearing from all constituencies, from employees and unions to large and small employers in virtually every industry, the Massachusetts legislature reached a compromise – something that is difficult to come by in the current political climate.
This compromise legislation in Massachusetts is just one example of how states have crafted solutions that balance protections for employees while preserving employer interests. Other states and cities have enacted similar laws that balance the same interests, and which reflect the nuanced concerns of citizens of those states – most recently, the District of Columbia (2022), Colorado (2022), Illinois (2022), Nevada (2021), Rhode Island (2020), Virginia (2020), Washington state (2020), Maine (2019), Maryland (2019), and New Hampshire (2019). Tellingly, despite proposals in multiple states to ban noncompetes outright, including in Massachusetts, no state has done so continuously since 1890. Several of the states and cities that have passed noncompete legislation over the past few years, including Illinois and Washington, D.C., started with proposals to ban noncompetes, but ended up with something far more nuanced, similar to the compromise legislation enacted by the Massachusetts legislature in 2018.
But with one swipe of a regulatory pen, the Commission proposes to overrule choices the citizens of 47 states and the District of Columbia made through their elected representatives. Such an undemocratic action should not be lightly taken. As the Commonwealth’s adopted son—and, ironically, namesake of the antitrust movement of which Chair Khan is a prominent member— Justice Louis Brandeis famously said in his dissenting opinion in New State Ice Co. v. Liebmann:
To stay experimentation in things social and economic is a grave responsibility. Denial of the right to experiment may be fraught with serious consequences to the nation. It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.
Accordingly, the Greater Boston Chamber asks that the Commission leave the compromise legislation enacted by the Massachusetts legislature in place, allow the states to serve as the “laboratories of democracy” envisioned by Justice Brandeis, and withdraw the NPRM.
The 2018 Massachusetts Compromise Noncompete Legislation 
The process that ultimately culminated in the Massachusetts legislature passing, and Governor Charlie Baker signing, compromise noncompete legislation in 2018 began with two competing bills. Specifically, on January 12, 2009, then-Representative (now Senator) William Brownsberger, filed H.1794, a bill that would have banned noncompetes outright. The following day, Representative Lori Ehrlich filed H.1799, a bill that would have reformed Massachusetts noncompete law, following many of the legislative decisions of the then-recently enacted Oregon noncompete legislation, but stopped well short of a ban. This kicked off the deliberative legislative process with lawmakers evaluating the competing interests underlying noncompetes through public hearings, and meetings with individuals, companies, and various interest groups. Over time, the Massachusetts legislature inched slowly and painstakingly over the ensuing decade toward a compromise bill that balanced all of these competing interests, with multiple bills proposed and ultimately rejected each year. Examples of bills introduced each year include another proposal, this time by then-Governor Deval Patrick, in 2014 to completely ban noncompetes, as well as proposals to impose three- or six-month caps and requiring garden leave, among other things. While these efforts were laborious, they reflected the democratic process and eventually yielded the necessary compromise needed to fairly accommodate the competing interests at play. Ultimately, the Massachusetts legislature passed the current legal framework governing noncompetes into law effective October 1, 2018.
Why is the Compromise Legislation Significant?
Attitudes toward noncompetes do not fit neatly into a “conservative” or “liberal” political litmus test, as there are competing interests recognized by those on both sides of the political aisle. On the one hand, noncompetes are one of the most effective tools to protect trade secrets and confidential information, customer relationships, and a business’s investment in itself and its employees. On the other hand, noncompetes can impede employee mobility, and thereby may conflict with fundamental notions of individual liberty.
Forty-seven states and the District of Columbia permit post-employment noncompetes to varying degrees, while only three states ban them. Two of the states that ban noncompetes (North Dakota and Oklahoma) are among the most conservative politically, while the third, California, is among the most liberal politically. Notably, each of these states passed its noncompete ban in the 1800s, well before the Commission came into existence in 1914, and no state has enacted and retained a ban since—regardless of political bent.
In recent years, misuses of noncompetes have received widespread media attention, which has led to an active debate across the country about the appropriate uses of noncompetes. As demonstrated by Massachusetts, reasonable legislation aimed at curbing the potential for abuse is a laudable goal, and can be accomplished without banning outright an important tool to protect a company’s assets. The most recent trends in the states that have enacted noncompete legislation have been toward imposing minimum compensation thresholds and advance notice requirements for post-employment noncompetes. Additionally, many states have implemented (or considered implementing) penalties for employers that fail to comply with relevant law, including fines or shifting of attorneys’ fees. Each state has handled these issues differently, as there is no one-size- fits-all solution, and each state has its own economy, industries, and civic and economic values.
Eleven states plus the District of Columbia have passed laws prohibiting the use and enforcement of noncompetes against “low wage” workers, defined as those earning compensation of anywhere from $14.50 per hour to $150,000 per year for most employees. Some are simple wage thresholds (e.g., District of Columbia, Illinois); others are formulas based on minimum wage, the poverty level, or the like (e.g., Maine, Virginia); and a few are based, at least in part, on whether an employee is exempt under the Fair Labor Standards Act (e.g., Massachusetts, Rhode Island).
Similarly, eight states plus the District of Columbia have enacted statutory notice requirements.11 Some are tied to when an offer is made (e.g., Maine, D.C.) or accepted (e.g., Colorado, New Hampshire); others are tied to the commencement of employment (e.g., Illinois, Massachusetts, Oregon); Virginia requires the posting of a notice at all times; Colorado requires a separate, standalone notice to be provided to employees subject to noncompetes; and Oregon additionally requires that the employer provide a signed copy of the noncompete to an employee within 30 days after termination of employment.
All of these issues, and many more, were debated, negotiated, and hashed out in Massachusetts (and elsewhere) – democratically – culminating in the enactment in 2018 of comprehensive compromise legislation. While the Massachusetts legislature made different choices than other states based upon what it determined would most benefit its citizens, its economy, and its civic and commercial values, that is exactly how “laboratories of democracy” are intended to work.
What is The Compromise Legislation?
At its core, the compromise legislation balances protections for employees (by imposing compensation criteria and thresholds and providing various procedural protections), while still preserving for employers an effective tool to protect their trade secrets and confidential information, customer relationships, and the stability of their workforces.
Prohibits restrictions for certain classes of vulnerable workers.
In an effort to protect low wage workers and certain other vulnerable groups, the Massachusetts compromise legislation prohibits the use of noncompetes for: (1) employees who are classified as nonexempt under the Fair Labor Standards Act; (2) undergraduate or graduate students in internships or short-term employment relationships (paid or unpaid) while enrolled in full-time or part-time undergraduate or graduate educational institutions; (3) employees who have been laid off or terminated without cause; and (4) employees younger than 18.
Requires advance notice of restrictions.
In an effort to avoid the situation in which an employee leaves one job to start another, only to learn on the first day that signing a noncompete is a condition of employment – what the Commission refers to as employer “coercion” – the compromise legislation mandates that prospective employees be provided with the noncompete with the formal offer letter, or at least ten business days prior to the first day of work, whichever is earlier, and that existing employees be provided with at least ten business days’ notice before the noncompete becomes effective. The compromise legislation also requires that individuals be advised in writing of their right to consult with counsel before signing, and that both the employer and employee sign the agreement.
Limits duration, geographic scope, and scope of proscribed activities.
The compromise legislation limits noncompetes to twelve months following the employee’s departure, unless the employee breaches a fiduciary duty to the employer or has “unlawfully taken, physically or electronically, property belonging to the employer,” in which case the duration can be extended up to two years following separation.
With respect to the geographic scope of any noncompete, the compromise legislation provides that “[t]he agreement must be reasonable in geographic reach in relation to the interests protected. A geographic reach that is limited to only the geographic areas in which the employee, during any time within the last 2 years of employment, provided services or had a material presence or influence is presumptively reasonable.”
And with respect to the scope of proscribed activities, the compromise legislation provides that “[t]he agreement must be reasonable in the scope of proscribed activities in relation to the interests protected. A restriction on activities that protects a legitimate business interest and is limited to only the specific types of services provided by the employee at any time during the last 2 years of employment is presumptively reasonable.”
Requires mutually agreed upon and fair and reasonable consideration that is independent from the continuation of employment.
The compromise legislation also requires enhanced consideration for noncompetes, in particular for existing employees who are asked to sign new or updated noncompetes after commencement of employment. Specifically, any noncompete must be “supported by a garden leave clause or other mutually-agreed upon consideration between the employer and the employee,” and such consideration must be specified in the noncompetition agreement.
Although garden leave is not required, “[t]o constitute a garden leave clause . . . , the agreement must (i) provide for the payment, consistent with the requirements for the payment of wages . . . on a pro-rata basis during the entirety of the restricted period, of at least 50 percent of the employee’s highest annualized base salary paid by the employer within the 2 years preceding the employee’s termination; and (ii) except in the event of a breach by the employee, not permit an employer to unilaterally discontinue or otherwise fail or refuse to make the payments.”
For existing employees being asked to sign a new or updated noncompete after the commencement of employment, there is an additional requirement that the noncompete “must be supported by fair and reasonable consideration independent from the continuation of employment.”
Permits judicial reformation.
The Massachusetts statute also permits—but does not require—a court to modify a noncompete if the agreement as drafted is too broad. This provision codifies the pre-existing common law, and provides an avenue for a judge to limit (or refuse to enforce) a noncompete that is unduly restrictive under the circumstances. The fact that the statute further states that the court “may, in its discretion, reform or otherwise revise” a noncompete (emphasis added) provides an additional incentive for employers to carefully draft their agreements. Indeed, if a court determines that the expansive breadth of a noncompete suggests an attempt to abuse or otherwise misuse such a covenant, the court can decline to exercise its discretion to modify the noncompete, and may instead refuse to enforce the noncompete in any way (in contrast to some other states, where a court is statutorily required to reform an overbroad noncompete, if a more limited covenant would be enforceable ).
Use of Massachusetts law and forum.
The Massachusetts compromise legislation also includes a provision prohibiting a choice of law provision that would “have the effect of avoiding the requirements” of the statute, if the employee “is, and has been for at least 30 days immediately preceding his or her cessation of employment, a resident of or employed in Massachusetts at the time of his or her termination of employment.” Similarly, it requires that all civil actions relating to noncompetes under the statute “be brought in the county where the employee resides or, if mutually agreed upon by the employer and employee, in Suffolk county ” Accordingly, like some other states, the Massachusetts legislation attempts to curb avoidance of the protections of Massachusetts law with respect to those who reside or work in the Commonwealth, and seeks to limit out-of-state litigation that might be onerous for a Massachusetts resident or employee.
Key exceptions in the compromise legislation.
The compromise legislation is targeted at noncompetes, and thus identifies a number of critical exceptions. Specifically, the compromise legislation expressly carves out from the definition of a covered noncompete the following types of agreements:
The NPRM Would Wipe Out Bipartisan Compromise Legislation in Massachusetts
The Commission seeks to prevent Massachusetts (and 46 other states and Washington, D.C.) from continuing to enforce narrowly tailored employee noncompetes in appropriate circumstances, regardless of the employee protections put in place and the decisions made by elected officials. It would affect many other types of agreements as well, such as noncompetes entered into in connection with the sale of a business with employees owning less than 25% of the company; noncompetes outside of the employee relationship; noncompetes entered into in connection with a separation agreement, regardless of the consideration; and even potentially garden leave provisions – as well as any of the types of agreements enumerated above that the Commission decides at some point in the future constitute “de facto” noncompetes.
The NPRM would remove from the states the autonomy to regulate noncompetes in a manner that best serves their citizens and benefits their economies, in favor of a one-size-does- not-fit-all solution – a solution that not even a single state has chosen to enact and retain in well over a century. Even worse, it would do so on a flawed premise – that noncompetes necessarily suppress wages and stifle innovation.28 While opponents of noncompetes often point to California’s economy as evidence of the harmful effects on noncompetes on wages and innovation, a close look at the other states that have banned noncompetes tells a far different story. As noted above in Section II, North Dakota and Oklahoma have also banned noncompetes, yet average employee wages in those states are far lower than average employee wages in Massachusetts (and those states’ economies are smaller than Massachusetts’, even when adjusted for population size). In fact, average wages in Massachusetts are among the highest in the country, and indeed are higher than average wages in California. And given Massachusetts’ flourishing innovation economy, a claim that banning noncompetes is the only way to promote innovation cannot pass serious scrutiny. Thus, the Greater Boston Chamber believes that the positive effect of banning noncompetes on California’s economy is vastly overstated, and Massachusetts’ vibrant and innovative business community is further evidence that reasonable enforcement of noncompetes cannot be presumed to create poor economic outcomes.
The Massachusetts legislature worked hard, over the course of almost a decade, to reach a bipartisan consensus that may not be perfect, but recognizes the interests and concerns of both employers and employees, and was a fair compromise. Allowing unelected federal bureaucrats to wipe out hundreds of years of judicial precedents and careful legislative compromises with the stroke of a pen would grossly infringe upon states’ rights and turn a deaf ear to Justice Brandeis’s observation that, under our system of federalism, “a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country” – and his sage admonition that “[d]enial of the right to experiment may be fraught with serious consequences to the nation.”
For the reasons set forth here, the Greater Boston Chamber of Commerce asks that the Commission withdraw the NPRM.
 Russell Beck, “A Brief History of Noncompete Regulation,” Fair Competition Law Blog (Oct. 11, 2021), available at https://faircompetitionlaw.com/2021/10/11/a-brief-history-of-noncompete-regulation/.
 See id.
 285 U.S. 262, 311 (1932). Indeed, Justice Brandeis is quoted as having said after the Supreme Court unanimously ruled to gut large swaths of the New Deal under the nondelegation doctrine in A.L.A Schechter Poultry Corp. v. U.S ., 295 U.S. 495 (1935): “This is the end of this business of centralization, and I want you to go back and tell the President that we’re not going to let this government centralize everything. It’s come to an end. As for your young men, you can call them together and tell them to get out of Washington – tell them to go home, back to the States. That is where they must do their work.” Harry Hopkins, “Statement to Me by Thomas Corcoran Giving His Recollections of the Genesis of the Supreme Court Fight” (April 3, 1939).
 The background of the Massachusetts compromise legislation is drawn primarily from Russell Beck, “Massachusetts noncompete and trade secret reform has arrived: What you need to know,” Fair Competition Blog (Aug. 3, 2018), available at https://faircompetitionlaw.com/2018/08/01/massachusetts-noncompete-and-trade-secret- reform-has-arrived-what-you-need-to-know/.
 Mass. Gen. Laws. Ch. 149, § 24L. Prior to enactment of this compromise legislation, Massachusetts law already banned noncompetes for certain healthcare professionals including physicians (M.G.L. c. 112, § 12X); nurses (M.G.L. c. 112, § 74D); psychologists (M.G.L. c.112, § 129B); social workers (M.G.L. c. 112, § 135C); and broadcasters (M.G.L. c. 149, § 186).
 See Beck Reed Riden 50-State Noncompete Survey, available at https://faircompetitionlaw.com/wp- content/uploads/2023/02/Noncompetes-50-State-Noncompete-Survey-Chart-20230211-updated.pdf; see also Epstein Becker Green 50-State Noncompete Survey, available at https://www.ebglaw.com/50-State-Noncompete-Survey; Seyfarth 50 State Desktop Reference, available at https://www.tradesecretslaw.com/2022/12/articles/restrictive- covenants/now-available-2022-2023-edition-of-50-state-non-compete-desktop-reference/.
 See N.D. Cent. Code § 9-08-06; Cal. Bus. & Prof. Code § 16600; OK. Stat. §15-2 19A.
 Michigan also passed legislation banning noncompetes in 1905 but rescinded that legislation in 1985.
 The Greater Boston Chamber agrees that abuses of noncompetes should be addressed, but also believes that such abuses, while garnering significant media attention, are far less common than reasonable and proper uses of noncompetes.
 On one end of the spectrum is New Hampshire, where the threshold is $14.50 per hour, and on the other end is the District of Columbia, where the threshold is $150,000 for most employees and $250,000 for medical specialists. Other states with compensation thresholds include Colorado, Illinois, Maine, Maryland, Massachusetts, Nevada, Oregon, Rhode Island, Virginia, and Washington state. Some of the thresholds increase annually or on other set schedules, while others utilize formulas tied to inflation. A few will not increase without statutory amendments. See Russell Beck, “New Noncompete Wage Thresholds for 2023,” Fair Competition Law Blog (Feb. 6, 2023), available at https://faircompetitionlaw.com/2023/02/06/new-noncompete-wage-thresholds-for-2023/.
 Colorado, Illinois, Maine, Massachusetts, New Hampshire, Oregon, Virginia, Washington, and the District of Columbia. See Russell Beck, “Updated chart of noncompete notice requirements,” Fair Competition Law Blog (Feb. 5, 2023), available at https://faircompetitionlaw.com/2023/02/05/updated-chart-of-noncompete-notice- requirements/.
 Mass. Gen. Laws. Ch. 149, § 24L(c).
 Id., § 24L(b)(i).
 The compromise legislation also prohibits enforcement of a noncompete where an employee has been laid off or terminated without cause, unless the noncompete falls within a statutory exception (see Section V.7, below).
 Id., § 24L(b)(iv).
 Id., § 24L(b)(v).
 Id., § 24L(b)(vi).
 Id., § 24L(b)(vii).
 Id., § 24L(a)(ii).
 Id., § 24L(d).
 See, e.g., Fla. Stat. § 542.335(1)(c); Tex. Bus. & Com. Code Ann. § 15.51(c).
 Mass. Gen. Laws. Ch. 149, § 24L(e).
 Id., § 24L(f). Some federal courts in other jurisdictions have disregarded this venue provision, in light of the federal policy in favor of enforcing forum selection clauses except where it would be “unreasonable” to do so, however. See, e.g., Hilb Group of New England, LLC v. LePage, 2022 WL 1538583 (E.D. Va. May 16, 2022); Onward Search LLC v. Noble, 2022 WL 2669520 (D. Conn. July 11, 2022).
 Id., § 24L(a).
 Washington, D.C. initially passed a near-total ban on noncompetes in 2021, only to vacate that law in 2022, before it became effective, and replace it with a wage threshold. Further, in 2017, California (not included in the 47 states referenced above) passed Labor Code, § 925, which arguably established conditions under which an employee could opt out of California’s long-standing ban on noncompetes.
 Erik Weibust and Stuart Gerson, “FTC’s Noncompete Proposal is Based on Misrepresentations,” Law360 (Jan. 26, 2023), available at https://www.law360.com/articles/1569485/ftc-s-noncompete-proposal-is-based-on- misrepresentations.
 Russell Beck, “Misconceptions in the Debate about Noncompetes,” Law360 (July 8, 2019), available at https://www.law360.com/articles/1174776/misconceptions-in-the-debate-about-noncompetes (“It is a mistake to attempt to justify the anti-noncompete position with the overly simplistic Silicon Valley-Massachusetts dichotomy or preliminary research without understanding the error in the Silicon Valley-Massachusetts comparison, the limitations of the research, or the unintended consequences of the advocated-for reform.”).
 See https://www.bls.gov/oes/current/oessrcst.htm (annual mean wage for all occupations in Massachusetts in 2021 was $71,940, as compared to $68,510 in California, $53,380 in North Dakota, and $48,360 in Oklahoma); see also https://www.statista.com/statistics/243850/private-industry-wages-per-employee-in-the-us-by-state/.
 See https://www.bea.gov/data/gdp/gdp-state; https://www.statista.com/statistics/248063/per-capita-us- real-gross-domestic-product-gdp-by-state.
 See footnote 28 above for comparative mean wages from the U.S. Bureau of Labor Statistics.
 See https://www.masslive.com/business/2022/03/massachusetts-ranked-most-innovative-state-in-the- country-this-year-according-to-wallethub-study.html?outputType=amp (Massachusetts named the most innovative state in the nation in 2022); https://businesswest.com/blog/state-maintains-rd-leadership-says-new-innovation- economy-index/ (Massachusetts a leading state in R&D investment and venture capital investment).