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Could the FTC’s Proposed Rule Banning Non-Compete Agreements Apply to the PGA Tour Handbook?

Much of the animosity between the PGA Tour, LIV Golf, and certain players over the last two years has been the ability of golfers to play on multiple tours simultaneously. LIV Golf (and some defected golfers) have argued that the PGA Tour has unfairly restricted competition by suspending certain players that play in LIV Golf events that are held at the same time as PGA Tour events. Conversely, the PGA Tour argues that such rules are necessary to ensure that they are able to put forth a reliable supply of quality golfers and keep sponsorship and broadcast dollars coming in, which are critical to the Tour’s overall success.

At the heart of this push and pull has been the PGA Tour’s reliance on their own handbook, which players agree to abide by when they join the Tour. One regulation in the handbook generally restricts Tour players from participating in events when there is a PGA Tour event taking place at the same time. According to the handbook, players who play a minimum of 15 events in a season are eligible for three conflicting-event releases per season, which can be denied at Commissioner Jay Monahan’s discretion. The PGA Tour has, obviously, taken the position that playing in LIV Golf events is a significant enough breach of its regulations that they have denied these release requests and suspended players who have joined LIV.

Some sports lawyers, including Darren Heitner of Heitner Legal, have stated that the PGA Tour’s response of a suspension or ban for players who violate the handbook restrictions “has the feel of a non-compete” which may intend to prevent players from performing for competitive leagues. Employers generally impose non-compete agreements to reduce turnover, prevent employees from taking all their knowledge and moving to a competitor, to protect trade secrets, or simply to improve leverage in employment negotiations. Non-compete clauses have long been a source of contention among politicians, and not necessarily along party lines. Many believe non-competes are necessary to protect businesses from key employees taking all their knowledge and information and going to a direct competitor. Others argue that they suppress competition by restricting employees from working for whoever they want, thus suppressing wages and hurting workers.

The FTC apparently believes the latter. On January 5, they proposed a rule to ban non-compete clauses, arguing that they “hurt workers and harm competition” and estimate that the new rule could increase workers’ earnings by nearly $300 billion per year. Specifically, the FTC’s proposed rule would make it illegal for an employer to: (i) enter into or attempt to enter into a non-compete with a worker; (ii) maintain a non-compete with a worker; or (iii) represent to a worker, under certain circumstances, that the worker is subject to a non-compete.

Most notably, the proposed rule would apply to independent contractors and anyone who works for an employer, whether paid or unpaid. It would also require employers to rescind existing non-compete agreements and actively inform workers that they are no longer in effect. Finally, the FTC has stated that “other types of employment restrictions could be subject to the rule if they are so broad in scope that they function as non-competes."

The proposed FTC rule could spell trouble for the PGA Tour. Although the competing event restriction in their handbook is not a non-compete, it may have the feel and effect of one. Ultimately, whether the proposed rule would affect the PGA Tour if ultimately adopted would turn on whether the FTC determines that the PGA Tour’s competing event policy is “so broad in scope that it functions as a non-compete.” Conversely, the PGA Tour can likely argue that golfers who have defected to LIV for hundreds of millions of dollars are clearly not harmed by the rule, whose ultimate purpose is to protect workers and increase wages. However, the FTC is now investigating the PGA Tour for a second time since 1995, and the two entities do not have the most amicable relationship.

The public comment period for the rule, which will surely produce no shortage of comments, will be open soon. It remains to be seen, however, whether this rule will ultimately be adopted or whether it would apply to the PGA Tour’s competing event policy. This is one to keep an eye on.

John Nucci is a 2022 graduate of Penn State Law and a Corporate Associate (pending admission) at Woods Oviatt Gilman LLP in Rochester, NY. He can be reached via Twitter at @Jnucci23 or by email at [email protected].

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