April 10, 2023

National Restaurant Association and Restaurant Law Center Request FTC Withdraw Proposal on Non-Compete Clauses

In comments, the groups set the record straight on industry use of non-competes with hourly employees
Washington, D.C. – Today, the National Restaurant Association and the Restaurant Law Center (Law Center) submitted comments to the Federal Trade Commission asking it to withdraw its Notice of Proposed Rulemaking (NPRM) on non-compete clauses. In the comments, the organizations assert that should this proposed rule go into effect, there are likely to be unanticipated consequences that could harm employees and consumers in the restaurant industry rather than helping them, and could reduce competition rather than increasing it.

The joint opposition to the proposal is based on three grounds:
  1. Restaurant owners use non-competes sparingly with senior-level employees to protect confidential information. The proposed change is unnecessary and counterproductive because restaurant owners do not typically use them with restaurant managers or hourly employees.
  2. The Commission lacks clear Congressional authorization to ban or regulate non-compete agreements, which would be required for a Commission’s NPRM on non-competes.
  3. The regulation of non-compete clauses has been a state law issue for over 200 years. 

The Association and the Law Center focused on setting the record straight about the use of non-competes in the restaurant industry, which only uses them sparingly with senior-level employees to protect business owners’ most valuable and confidential information. When such employees are asked to sign an agreement voluntarily, it is in exchange for agreed upon considerations such as long-term incentives, discretionary bonuses, promotions, or generous separation packages. 

“While the public face of the restaurant industry may be the many wait staff, hostesses, bartenders, line cooks, dishwashers, and others who provide the backbone of an operation, restaurant owners almost never use non-competes with these types of employees,” said Jordan Heiliczer, director of labor and workforce policy at the National Restaurant Association. “In fact, it’s not uncommon for hourly employees to move between jobs at two competing restaurant brands, all with the knowledge of their restaurant employers.”

Fundamentally, the Association and Law Center hold that the FTC does not have the legal authority to ban non-compete clauses and that the regulation of these agreements should fall to the state legislatures, who have been regulating them for more 200 years.

“The Commission has no authority to promulgate this regulation and moving forward would only lead to costly and burdensome litigation,” said Angelo I. Amador, executive director of the Restaurant Law Center. “The Commission is unable to point to clear congressional authorization for the power it claims to have to issue this proposed regulation.”

Concerns about the economic impacts of the rule on small businesses was the main reason the Small Business Administration (SBA) Office of Advocacy submitted comments asserting that a “universal ban on non-compete clauses is inappropriate,” and that alternative approaches should minimize the impacts on small entities.  

Read the full National Restaurant Association and Restaurant Law Center joint comments here

About the National Restaurant Association

Founded in 1919, the National Restaurant Association is the leading business association for the restaurant industry, which comprises more than 1 million restaurant and foodservice outlets and a workforce of 15.5 million employees. Together with 52 State Associations, we are a network of professional organizations dedicated to serving every restaurant through advocacy, education, and food safety. We sponsor the industry's largest trade show (National Restaurant Association Show); leading food safety training and certification program (ServSafe); unique career-building high school program (the NRAEF's ProStart). For more information, visit Restaurant.org and find @WeRRestaurants on Twitter, Facebook and YouTube.

About the Restaurant Law Center 

The Restaurant Law Center (Law Center) is an independent public policy organization affiliated with the National Restaurant Association. It was established to enhance the industry’s voice in the judicial and regulatory arena. The Law Center works to protect and advance the restaurant industry and promote pro-business laws and regulations that allow restaurants to continue to grow, create jobs and contribute to a robust American economy. Find more information at restaurantlawcenter.org