#FTC noncompete ban

[nationallawreview]

Pennsylvania Federal Court Declines to Preliminarily Enjoin FTC Rule Banning Non-Competes

Earlier today (July 23, 2024), Judge Hodge in the U.S. District Court for the Eastern District of Pennsylvania denied a tree care company’s motion to stay the effective date and preliminarily enjoin the Federal Trade Commission’s (“FTC”) proposed final rule (“Final Rule”) banning nearly all non-competes. ATS Tree Services, LLC v. Federal Trade Commission, No. 2:24-cv-01743-KBH (E.D. Pa.). The…

[bright-and-burning]

so is gardening leave just how the uk handles noncompetes or?

[reasonsforhope]

Federal regulators on Tuesday [April 23, 2024] enacted a nationwide ban on new noncompete agreements, which keep millions of Americans — from minimum-wage earners to CEOs — from switching jobs within their industries.

The Federal Trade Commission on Tuesday afternoon voted 3-to-2 to approve the new rule, which will ban noncompetes for all workers when the regulations take effect in 120 days [So, the ban starts in early September, 2024!]. For senior executives, existing noncompetes can remain in force. For all other employees, existing noncompetes are not enforceable.

[That's right: if you're currently under a noncompete agreement, it's completely invalid as of September 2024! You're free!!]

The antitrust and consumer protection agency heard from thousands of people who said they had been harmed by noncompetes, illustrating how the agreements are "robbing people of their economic liberty," FTC Chair Lina Khan said. 

The FTC commissioners voted along party lines, with its two Republicans arguing the agency lacked the jurisdiction to enact the rule and that such moves should be made in Congress...

Why it matters

The new rule could impact tens of millions of workers, said Heidi Shierholz, a labor economist and president of the Economic Policy Institute, a left-leaning think tank. 

"For nonunion workers, the only leverage they have is their ability to quit their job," Shierholz told CBS MoneyWatch. "Noncompetes don't just stop you from taking a job — they stop you from starting your own business."

Since proposing the new rule, the FTC has received more than 26,000 public comments on the regulations. The final rule adopted "would generally prevent most employers from using noncompete clauses," the FTC said in a statement.

The agency's action comes more than two years after President Biden directed the agency to "curtail the unfair use" of noncompetes, under which employees effectively sign away future work opportunities in their industry as a condition of keeping their current job. The president's executive order urged the FTC to target such labor restrictions and others that improperly constrain employees from seeking work.

"The freedom to change jobs is core to economic liberty and to a competitive, thriving economy," Khan said in a statement making the case for axing noncompetes. "Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand."

Real-life consequences

In laying out its rationale for banishing noncompetes from the labor landscape, the FTC offered real-life examples of how the agreements can hurt workers.

In one case, a single father earned about $11 an hour as a security guard for a Florida firm, but resigned a few weeks after taking the job when his child care fell through. Months later, he took a job as a security guard at a bank, making nearly $15 an hour. But the bank terminated his employment after receiving a letter from the man's prior employer stating he had signed a two-year noncompete.

In another example, a factory manager at a textile company saw his paycheck dry up after the 2008 financial crisis. A rival textile company offered him a better job and a big raise, but his noncompete blocked him from taking it, according to the FTC. A subsequent legal battle took three years, wiping out his savings. 

-via CBS Moneywatch, April 24, 2024

--

Note:

A lot of people think that noncompete agreements are only a white-collar issue, but they absolutely affect blue-collar workers too, as you can see from the security guard anecdote.

In fact, one in six food and service workers are bound by noncompete agreements. That's right - one in six food workers can't leave Burger King to work for Wendy's [hypothetical example], in the name of "trade secrets." (x, x, x)

Noncompete agreements also restrict workers in industries from tech and video games to neighborhood yoga studios. "The White House estimates that tens of millions of workers are subject to noncompete agreements, even in states like California where they're banned." (x, x, x)

The FTC estimates that the ban will lead to "the creation of 8,500 new businesses annually, an average annual pay increase of $524 for workers, lower health care costs, and as many as 29,000 more patents each year for the next decade." (x)

Clearer explanation of noncompete agreements below the cut.

Noncompete agreements can restrict workers from leaving for a better job or starting their own business.

Noncompetes often effectively coerce workers into staying in jobs they want to leave, and even force them to leave a profession or relocate.

Noncompetes can prevent workers from accepting higher-paying jobs, and even curtail the pay of workers not subject to them directly.

Of the more than 26,000 comments received by the FTC, more than 25,000 supported banning noncompetes. 

[sunnybaker123]

Hey y'all, this is super important! Non-compete clauses help companies keep workers' wages low because they can't switch jobs with a "competing" company. Banning them could be a really positive change for workers' wages ❤

The FTC is accepting comments on the proposed ban through March 20, 2023 so please make your voice heard!

[zvaigzdelasas]

"We heard from employees who, because of noncompetes, were stuck in abusive workplaces," she said. "One person noted when an employer merged with an organization whose religious principles conflicted with their own, a noncompete kept the worker locked in place and unable to freely switch to a job that didn't conflict with their religious practices."

These accounts, she said, "pointed to the basic reality of how robbing people of their economic liberty also robs them of all sorts of other freedoms." The FTC estimates about 30 million people, or one in five American workers, from minimum wage earners to CEOs, are bound by noncompetes. It says the policy change could lead to increased wages totaling nearly $300 billion per year by encouraging people to swap jobs freely.

The ban, which will take effect later this year, carves out an exception for existing noncompetes that companies have given their senior executives, on the grounds that these agreements are more likely to have been negotiated. The FTC says employers should not enforce other existing noncompete agreements.

The vote was 3 to 2 along party lines. The dissenting commissioners, Melissa Holyoke and Andrew Ferguson, argued that the FTC was overstepping the boundaries of its power. Holyoke predicted the ban would be challenged in court and eventually struck down.

Shortly after the vote, the U.S. Chamber of Commerce said it would sue the FTC to block the rule, calling it unnecessary, unlawful and a blatant power grab.

Huh [23 Apr 24]

[mostlysignssomeportents]

Antitrust is a labor issue

I'm touring my new, nationally bestselling novel The Bezzle! Catch me SATURDAY (Apr 27) in MARIN COUNTY, then Winnipeg (May 2), Calgary (May 3), Vancouver (May 4), and beyond!

This is huge: yesterday, the FTC finalized a rule banning noncompete agreements for every American worker. That means that the person working the register at a Wendy's can switch to the fry-trap at McD's for an extra $0.25/hour, without their boss suing them:

https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes

The median worker laboring under a noncompete is a fast-food worker making close to minimum wage. You know who doesn't have to worry about noncompetes? High tech workers in Silicon Valley, because California already banned noncompetes, as did Colorado, Illinois, Maine, Maryland, New Hampshire, North Dakota, Oklahoma, Oregon, Rhode Island, Virginia and Washington.

The fact that the country's largest economies, encompassing the most "knowledge-intensive" industries, could operate without shitty bosses being able to shackle their best workers to their stupid workplaces for years after those workers told them to shove it shows you what a goddamned lie noncompetes are based on. The idea that companies can't raise capital or thrive if their know-how can walk out the door, secreted away in the skulls of their ungrateful workers, is bullshit:

https://pluralistic.net/2022/02/02/its-the-economy-stupid/#neofeudal

Remember when OpenAI's board briefly fired founder Sam Altman and Microsoft offered to hire him and 700 of his techies? If "noncompetes block investments" was true, you'd think they'd have a hard time raising money, but no, they're still pulling in billions in investor capital (primarily from Microsoft itself!). This is likewise true of Anthropic, the company's major rival, which was founded by (wait for it), two former OpenAI employees.

Indeed, Silicon Valley couldn't have come into existence without California's ban on noncompetes – the first silicon company, Shockley Semiconductors, was founded by a malignant, delusional eugenicist who also couldn't manage a lemonade stand. His eight most senior employees (the "Traitorous Eight") quit his shitty company to found Fairchild Semiconductor, a rather successful chip shop – but not nearly so successful as the company that two of Fairchild's top employees founded after they quit: Intel:

https://pluralistic.net/2021/10/24/the-traitorous-eight-and-the-battle-of-germanium-valley/

Likewise a lie: the tale that noncompetes raise wages. This theory – beloved of people whose skulls are so filled with Efficient Market Hypothesis Brain-Worms that they've got worms dangling out of their nostrils and eye-sockets – holds that the right to sign a noncompete is an asset that workers can trade to their employers in exchange for better pay. This is absolutely true, provided you ignore reality.

Remember: the median noncompete-bound worker is a fast food employee making near minimum wage. The major application of noncompetes is preventing that worker from getting a raise from a rival fast-food franchisee. Those workers are losing wages due to noncompetes. Meanwhile, the highest paid workers in the country are all clustered in a a couple of cities in northern California, pulling down sky-high salaries in a state where noncompetes have been illegal since the gold rush.

If a capitalist wants to retain their workers, they can compete. Offer your workers get better treatment and better wages. That's how capitalism's alchemy is supposed to work: competition transmogrifies the base metal of a capitalist's greed into the noble gold of public benefit by making success contingent on offering better products to your customers than your rivals – and better jobs to your workers than those rivals are willing to pay. However, capitalists hate capitalism:

https://pluralistic.net/2024/04/18/in-extremis-veritas/#the-winnah

Capitalists hate capitalism so much that they're suing the FTC, in MAGA's beloved Fifth Circuit, before a Trump-appointed judge. The case was brought by Trump's financial advisors, Ryan LLC, who are using it to drum up business from corporations that hate Biden's new taxes on the wealthy and stepped up IRS enforcement on rich tax-cheats.

Will they win? It's hard to say. Despite what you may have heard, the case against the FTC order is very weak, as Matt Stoller explains here:

https://www.thebignewsletter.com/p/ftc-enrages-corporate-america-by

The FTC's statutory authority to block noncompetes comes from Section 5 of the FTC Act, which bans "unfair methods of competition" (hard to imagine a less fair method than indenturing your workers). Section 6(g) of the Act lets the FTC make rules to enforce Section 5's ban on unfairness. Both are good law – 6(g) has been used many times (26 times in the five years from 1968-73 alone!).

The DC Circuit court upheld the FTC's right to "promulgate rules defining the meaning of the statutory standards of the illegality the Commission is empowered to prevent" in 1973, and in 1974, Congress changed the FTC Act, but left this rulemaking power intact.

The lawyer suing the FTC – Anton Scalia's larvum, a pismire named Eugene Scalia – has some wild theories as to why none of this matters. He says that because the law hasn't been enforced since the ancient days of the (checks notes) 1970s, it no longer applies. He says that the mountain of precedent supporting the FTC's authority "hasn't aged well." He says that other antitrust statutes don't work the same as the FTC Act. Finally, he says that this rule is a big economic move and that it should be up to Congress to make it.

Stoller makes short work of these arguments. The thing that tells you whether a law is good is its text and precedent, "not whether a lawyer thinks a precedent is old and bad." Likewise, the fact that other antitrust laws is irrelevant "because, well, they are other antitrust laws, not this antitrust law." And as to whether this is Congress's job because it's economically significant, "so what?" Congress gave the FTC this power.

Now, none of this matters if the Supreme Court strikes down the rule, and what's more, if they do, they might also neuter the FTC's rulemaking power in the bargain. But again: so what? How is it better for the FTC to do nothing, and preserve a power that it never uses, than it is for the Commission to free the 35-40 million American workers whose bosses get to use the US court system to force them to do a job they hate?

The FTC's rule doesn't just ban noncompetes – it also bans TRAPs ("training repayment agreement provisions"), which require employees to pay their bosses thousands of dollars if they quit, get laid off, or are fired:

https://pluralistic.net/2022/08/04/its-a-trap/#a-little-on-the-nose

The FTC's job is to protect Americans from businesses that cheat. This is them, doing their job. If the Supreme Court strikes this down, it further delegitimizes the court, and spells out exactly who the GOP works for.

This is part of the long history of antitrust and labor. From its earliest days, antitrust law was "aimed at dollars, not men" – in other words, antitrust law was always designed to smash corporate power in order to protect workers. But over and over again, the courts refused to believe that Congress truly wanted American workers to get legal protection from the wealthy predators who had fastened their mouth-parts on those workers' throats. So over and over – and over and over – Congress passed new antitrust laws that clarified the purpose of antitrust, using words so small that even federal judges could understand them:

https://pluralistic.net/2023/04/14/aiming-at-dollars/#not-men

After decades of comatose inaction, Biden's FTC has restored its role as a protector of labor, explicitly tackling competition through a worker protection lens. This week, the Commission blocked the merger of Capri Holdings and Tapestry Inc, a pair of giant conglomerates that have, between them, bought up nearly every "affordable luxury" brand (Versace, Jimmy Choo, Michael Kors, Kate Spade, Coach, Stuart Weitzman, etc).

You may not care about "affordable luxury" handbags, but you should care about the basis on which the FTC blocked this merger. As David Dayen explains for The American Prospect: 33,000 workers employed by these two companies would lose the wage-competition that drives them to pay skilled sales-clerks more to cross the mall floor and switch stores:

https://prospect.org/economy/2024-04-24-challenge-fashion-merger-new-antitrust-philosophy/

In other words, the FTC is blocking a $8.5b merger that would turn an oligopoly into a monopoly explicitly to protect workers from the power of bosses to suppress their wages. What's more, the vote was unanimous, include the Commission's freshly appointed (and frankly, pretty terrible) Republican commissioners:

https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-moves-block-tapestrys-acquisition-capri

A lot of people are (understandably) worried that if Biden doesn't survive the coming election that the raft of excellent rules enacted by his agencies will die along with his presidency. Here we have evidence that the Biden administration's anti-corporate agenda has become institutionalized, acquiring a bipartisan durability.

And while there hasn't been a lot of press about that anti-corporate agenda, it's pretty goddamned huge. Back in 2021, Tim Wu (then working in the White wrote an executive order on competition that identified 72 actions the agencies could take to blunt the power of corporations to harm everyday Americans:

https://www.eff.org/deeplinks/2021/08/party-its-1979-og-antitrust-back-baby

Biden's agency heads took that plan and ran with it, demonstrating the revolutionary power of technical administrative competence and proving that being good at your job is praxis:

https://pluralistic.net/2022/10/18/administrative-competence/#i-know-stuff

In just the past week, there's been a storm of astoundingly good new rules finalized by the agencies:

A minimum staffing ratio for nursing homes;

The founding of the American Climate Corps;

A guarantee of overtime benefits;

A ban on financial advisors cheating retirement savers;

Medical privacy rules that protect out-of-state abortions;

A ban on junk fees in mortgage servicing;

Conservation for 13m Arctic acres in Alaska;

Classifying "forever chemicals" as hazardous substances;

A requirement for federal agencies to buy sustainable products;

Closing the gun-show loophole.

That's just a partial list, and it's only Thursday.

Why the rush? As Gerard Edic writes for The American Prospect, finalizing these rules now protects them from the Congressional Review Act, a gimmick created by Newt Gingrich in 1996 that lets the next Senate wipe out administrative rules created in the months before a federal election:

https://prospect.org/politics/2024-04-23-biden-administration-regulations-congressional-review-act/

In other words, this is more dazzling administrative competence from the technically brilliant agencies that have labored quietly and effectively since 2020. Even laggards like Pete Buttigieg have gotten in on the act, despite a very poor showing in the early years of the Biden administration:

https://pluralistic.net/2023/02/11/dinah-wont-you-blow/#ecp

Despite those unpromising beginnings, the DOT has gotten onboard the trains it regulates, and passed a great rule that forces airlines to refund your money if they charge you for services they don't deliver:

https://www.whitehouse.gov/briefing-room/statements-releases/2024/04/24/fact-sheet-biden-harris-administration-announces-rules-to-deliver-automatic-refunds-and-protect-consumers-from-surprise-junk-fees-in-air-travel/

The rule also bans junk fees and forces airlines to compensate you for late flights, finally giving American travelers the same rights their European cousins have enjoyed for two decades.

It's the latest in a string of muscular actions taken by the DOT, a period that coincides with the transfer of Jen Howard from her role as chief of staff to FTC chair Lina Khan to a new gig as the DOT's chief of competition enforcement:

https://prospect.org/infrastructure/transportation/2024-04-25-transportation-departments-new-path/

Under Howard's stewardship, the DOT blocked the merger of Spirit and Jetblue, and presided over the lowest flight cancellation rate in more than decade:

https://www.transportation.gov/briefing-room/2023-numbers-more-flights-fewer-cancellations-more-consumer-protections

All that, along with a suite of protections for fliers, mark a huge turning point in the US aviation industry's long and worsening abusive relationship with the American public. There's more in the offing, too including a ban on charging families extra for adjacent seats, rules to make flying with wheelchairs easier, and a ban on airlines selling passenger's private information to data brokers.

There's plenty going on in the world – and in the Biden administration – that you have every right to be furious and/or depressed about. But these expert agencies, staffed by experts, have brought on a tsunami of rules that will make every working American better off in a myriad of ways. Those material improvements in our lives will, in turn, free us up to fight the bigger, existential fights for a livable planet, free from genocide.

It may not be a good time to be alive, but it's a much better time than it was just last week.

And it's only Thursday.

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/04/25/capri-v-tapestry/#aiming-at-dollars-not-men

[thetrashiestoftrash]

The FTC just announced a new rule banning noncompete agreements. A noncompete agreement is a rule set by an employer stating that employees cannot get a new job (or start a new business) within a certain industry and/or geographical area for a certain timeframe after leaving.

Originally, the idea was to encourage employers to invest in their employees by providing more training and developing useful skills, confidant in the knowledge that those employees wouldn't take that valuable training and quit to work for a competitor. But noncompete agreements have become increasingly common for all sorts of jobs. They trap workers in crappy jobs with low wages by limiting their options for leaving.

For example, Jimmy John's used to have a noncompete agreement that prohibited employees from working anywhere that sold sandwiches within three miles of any Jimmy John's establishment, during and for two years after employment. They have since rescinded the agreement and settled a related lawsuit out of court in 2016, but hopefully this illustrates how ridiculous these things can get.

My favorite quote from the article:

"The Commission also finds that instead of using noncompetes to lock in workers, employers that wish to retain employees can compete on the merits for the worker’s labor services by improving wages and working conditions."

[justinspoliticalcorner]

Paul Blest at More Perfect Union:

The Federal Trade Commission voted Tuesday to ban new noncompete agreements for all workers and make existing noncompetes null and void for everyone except senior executives. These agreements are used to restrict 30 million American workers from changing jobs or starting their own businesses due to claims that they could use “trade secrets” in their new roles.  Noncompete agreements can restrict job mobility based on geographic area (i.e., a doctor joining a new practice within 50 miles of their old one) or a time period after leaving the position (anywhere between several months to more than a year). They have been banned in multiple states in the past few years. 

But the FTC has issued a uniform ban that will cover hundreds of millions of workers following a 180-day period for for-profit companies to enter into compliance. More than 26,000 comments were submitted on the rule, more than 25,000 of which supported a noncompete ban, FTC staff said Tuesday.  The FTC estimated that the new rule will increase workers’ wages by up to $488 billion over 10 years, which FTC staff said would mean a $524 increase in annual wages for the average worker. The FTC also estimated that the rule would lead to more than 8,500 new businesses per year.   “Right now workers are stuck in place because of these noncompetes,” FTC chair Lina Khan told More Perfect Union in an interview about the rule. “So even if they get a better job opportunity with higher wages, with better benefits, they can't actually switch jobs, which is bad for those workers. It's also bad for other workers who won't have the opportunities that are not being created because of these noncompetes.”

Five states have passed bans on noncompetes, not including New York, where lawmakers passed a ban last year that was then vetoed by Gov. Kathy Hochul. After Oregon banned noncompete agreements in 2008, researchers found, average hourly wages for all workers were boosted by up to 3 percent; the same analysis found that low-wage workers subjected to noncompetes saw a substantial negative impact on their wages.  The final rule differs from the proposal in that “senior executives,” those in a “policy-making position” making more than $151,000 per year, will still be subjected to noncompete agreements signed before the effective date of the new rule.

Since announcing the proposal in early 2023, the FTC’s rule has come under fire from the business lobby. The U.S. Chamber of Commerce said before Tuesday’s meeting that it will file a lawsuit to block the proposal as soon as Wednesday. A top Chamber official said earlier this week that the rule “opens up a Pandora’s box where this commission or future commissions could be literally micromanaging every aspect of the economy,” Bloomberg reported.  But the FTC argues that noncompete agreements are “an unfair method of competition” that affect both high- and l0w-wage earners. In the medical profession, nearly half of all physicians are subject to noncompete agreements, according to the American Medical Association, which backs the effort to end the practice. (The FTC estimated that the new rule will result in “$74-$194 billion in reduced spending on physician services over the next decade.”)

The Federal Trade Commission voted to ban competition-stifling noncompete agreements except for senior executives.

[mariacallous]

More US workers will soon be free to leave their employers to work for rivals, thanks to a new federal rule that will block the long-standing practice of locking in workers with noncompete agreements.

The US Federal Trade Commission on Tuesday issued a final rule that bans most noncompetes nationwide. The agency estimated that by allowing people more freedom, the change would lead to the creation of 8,500 new businesses annually, an average annual pay increase of $524 for workers, lower health care costs, and as many as 29,000 more patents each year for the next decade.

The FTC says about one in five US workers are bound by contract clauses that prevent them from taking new jobs from a competitor, or starting their own competing businesses, for some period of time. The agreements can trap workers and slow career advancement and wage increases—two things workers often achieve by hopping jobs.

The agreements also disproportionately affect workers in tech and certain other roles: 36 percent of engineers and architects work under noncompetes, as do 35 percent of workers in computer and math fields, according to research from the Universities of Maryland and Michigan.

Under the FTC’s new rule, “tech workers will probably experience a rise in the outside opportunities that they face,” says Evan Starr, an associate professor of business at the University of Maryland who worked on the research. “They’ll have more freedom to work where they want; they will be more likely to be paid higher wages.”

Opponents of noncompetes say they hurt workers by keeping them in lower-waged jobs and also stifle innovation, preventing people from starting their own businesses or putting innovative ideas into practice. Noncompete supporters argue that the arrangements encourage investment in staff and protect trade secrets. But recent research from Starr indicates that banning noncompetes hasn’t led to an increase in trade secret litigation.

The new FTC rule has a carve-out to keep existing noncompetes for senior executives in place. But it blocks companies from creating new noncompetes for these high-level workers. The rule is due to take effect in about four months, but it’s expected to face challenges. Two commissioners who voted against the rule saw it as overstepping the FTC’s power. The US Chamber of Commerce quickly announced after the rule passed that it will sue to try to block it.

Several states, including tech hub California, have already banned enforcement of noncompetes. But a recent tidal shift has seen the issue resonate in dozens of states. In the 2023 legislative session, 38 states introduced 81 bills that sought to ban or restrict enforcement of noncompetes. California’s long-established law is seen as part of the reason Silicon Valley became a hub for innovation, while Massachusetts’s once-similar tech corridor didn’t soar in the same way.

Tech executive Daniel Powers has battled noncompetes twice in his career. In 2010, IBM tried to delay his move from New York to Seattle to work for Amazon Web Services, the online retailer’s cloud division, by a year. The parties settled on Powers taking six months off. Fortunately for Powers, Amazon agreed to pay him even while he couldn’t work.

Two years later, the tables turned. When Powers attempted to take a job with Google Cloud, Amazon sued him, saying he had agreed not to work for one of its competitors within 18 months of leaving. The incident drew headlines as the first noncompete case Amazon had brought against someone inside fast-growing AWS, Powers recalls.

Powers had to move to California—where noncompetes aren’t legal—for the new gig, and his attorney told him to get there as soon as possible. By living in a different state, the lawsuit could be tried in federal court, where his attorney felt Amazon had less of an advantage compared to Washington state court. A federal judge ended up siding with Powers, and he lost only about three months of work at Google while the case played out.

Amazon, IBM, and Google did not immediately respond to requests for comment.

Had Powers not received discounted legal help over the years, he says, he could have easily spent over $100,000 battling noncompetes. “It’s just not fair to the employees,” says Powers, who now runs cloud advisory firm What's Next Consulting. “When I won, I got hundreds of emails and texts from Amazon employees thanking me for beating them.”

People in Washington state who want to leave one of the tech giants often must have difficult conversations with their families, advisers, and potential new employer about the risks of litigation and potentially being without a paycheck for a long stretch. Powers estimates that he has aided over 200 former Amazon and IBM colleagues in the process. California workers have no such concerns. “It’s just, ‘OK, goodbye,’” Powers says. “There’s nothing companies can do about it.”

If the new FTC rule ends up in front of the US Supreme Court, he says, his message to the justices will be simple. “Taking away a person’s ability to work in an industry they are trained in, have skills in, and have been in is a massive disservice to the employee,” Powers says. “It’s not the right thing to do to have these agreements.”

[meret118]

A federal judge in Texas has blocked the Federal Trade Commission from moving forward with its ban on noncompete agreements, jeopardizing a major reform pursued by President Joe Biden

. . .

Employers use noncompete agreements to prevent workers from taking jobs with competing firms. Once the domain of higher-paid, executive-level positions, the agreements are now found throughout the economy, including in low-wage sectors.“

The FTC estimates that the ban would increase wages by between $400 billion and $488 billion over a decade”

The FTC approved the ban in a 3-2 vote in April, with the commission’s three Democrats in favor and two Republicans against

[sasquapossum]

This is huge. I spent most of my career under one non-compete or another. Once I almost had a heart attack because I got a phone message from a lawyer at an ex-employer who was notoriously aggressive about prosecuting these and also practically owned the local court. Even though I felt I was perfectly in the clear and would have prevailed, it was still scary. (Fortunately it turned out to be some patent paperwork that they needed me to sign. What a relief.) Banning non-competes might hurt some of the giants by forcing them to prove actual misappropriation of trade secrets when it occurs instead of relying on non-competes (which is way easier for them), but the main effect will be a huge boost for innovation and the economy.

[nationallawreview]

Federal Court Enjoins Federal Trade Commission’s Rule Prohibiting Non-Competition Agreements (US)

In January 2023, the U.S. Federal Trade Commission (FTC) proposed a sweeping rule that, with limited exceptions (such as for highly compensated executives or in connection with the sale of a business), would prohibit employers from entering into post-employment non-competition arrangements with workers. (See our post here.) Under the proposed rule, an agreement between an employer and a worker –…

[elfwreck]

...existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Existing noncompetes for senior executives - who represent less than 0.75% of workers - can remain in force under the FTC’s final rule, but employers are banned from entering into or attempting to enforce any new noncompetes...

No more, "if you stop working for us, you can't work for any of our competitors for X years."

No more having to decide between staying at a terrible job or switching to an entirely different industry.

The Commission also finds that instead of using noncompetes to lock in workers, employers that wish to retain employees can compete on the merits for the worker’s labor services by improving wages and working conditions

This ruling is from Apr 23, 2024, and is supposed to go into effect on September 4, 2024.

Odds are, enforcement of noncompete contracts between now and September is going to be difficult. It won't be impossible--companies can still theoretically try to go after workers who quit and take up a new job in violation of a noncompete, and presumably can continue with penalties/lawsuits related to that over several years while trying to prove things--but it'll be harder, and they'll have to decide if it's worth the money to chase down one person when they know it can't have a chilling effect on future employees.

In the past, a rep for enforcing noncompetes made it useful to prosecute; once that rep isn't useful, it only serves to drive away potential new employees. The financial benefit to companies was never based on "penalize the people who broke the noncompete" but "force everyone else to stay at a shitty job so they don't risk going bankrupt fighting the noncompete contract." Enforcement was devastating to workers but not an actual gain for the company.

[originalleftist]

The FTC just banned ALL noncompete agreements for American workers, except for an exemption for when a business is sold, and ended all existing agreements, except those for senior executives.

The vote was 3/2, with all Democratic appointees voting yes, and both Republicans voting no. The current chair is a Biden appointee.

This is a GIGANTIC win for workers, and it WOULD NOT have been possible without Joe Biden as President.

It is likely to be challenged in court, however, which means this could be struck down by SCOTUS. But Federal judges are nominated by the President and approved by the Senate, so if you're tired of seeing good shit like this get struck down in the courts, you know what you need to do: elect Democrats to the Presidency, and a Democratic majority in the Senate.

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This One Thing Would Increase Wages By $300 Billion 

There's a dirty trick many employers use to keep workers from getting a better job.

Some 30 million Americans are trapped by contracts that say if they leave their current job, they can't work for a rival company or start a new business of their own.

These are called non-compete agreements.

They block workers from seeing higher wages or better working conditions. And they enlarge corporate monopoly power by stifling competition.

But a sweeping new rule from the Federal Trade Commission would put a stop to these non-compete agreements.

The FTC estimates that banning them could increase wages by nearly $300 billion a year overall by allowing workers to pursue better job opportunities.

But non-competes aren’t just bad for workers. They also harm the economy as a whole by depriving growing businesses of the talent and experience they need to build and expand.

Experts argue California’s ban on non-competes was a major reason for Silicon Valley’s boom.

For several decades, non-compete agreements have been cropping up all over the economy — not just in high-paying fields like banking and tech but as standard boilerplate for employment contracts in many lower-wage sectors such as construction, hospitality, and retail.

A recent survey found that non-competes are used for workers in more than a quarter of jobs where the typical employee only has a high school diploma. Another found that they disproportionately impact women and people of color.

Employers say they need noncompete agreements to protect trade secrets and investments they put into growing their businesses, like training workers.

Rubbish. Employers in states that already ban these agreements (such as California) show no sign of being more reluctant to invest in their businesses or train workers.

The real purpose of noncompetes is to make it harder (or impossible) for workers to bargain with rival employers for better pay or working conditions. Workers in states that have banned non-compete agreements have seen larger wage increases and more job mobility than workers in states where they are still legal.

As we learn again and again, the economy needs guardrails — and workers deserve protection. Otherwise, unfettered greed will lead to monopolies that charge high prices and suppress wages.

America once understood the importance of fighting monopolies. Woodrow Wilson created the Federal Trade Commission in 1914 to protect the public against the powerful corporate monopolies that fueled unprecedented inequality and political corruption.

In 1976, when I ran the policy planning staff at the FTC, it began cracking down on corporations under its then assertive chairman, Michael Pertschuk.

Corporate lobbyists and their allies in Congress were so unhappy they tried to choke off the agency’s funding, briefly closing it down. Pertschuk didn’t relent, but eventually he (and I) were replaced by Ronald Reagan’s appointees, who promptly defanged the agency.

Now, under its new Biden-appointed chair, Lina Khan, the FTC is back. Its ban on non-compete agreements nationwide marks the first time since Pertschuk that the agency has flexed its muscle to issue a rule prohibiting an unfair method of competition.

The rule is hardly a sure thing. I wouldn’t be surprised if the radical-right Republicans, now in control of the House, tried to pull off a stunt similar to what the House tried in the late 70s. And corporations are sure to appeal the rule all the way up to the Supreme Court.

In the meantime, kudos to Lina Khan and the FTC for protecting American workers from the unfettered greed of corporate America.

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FTC bans employers from using noncompete clauses | CNN Business