#noncompete clauses

[darkfrog24]

The United States Federal Trade Commission is taking comments from the public about whether to ban or limit noncompete clauses in employee contracts. If you are an American, please use your power to participate in your government. If you are not an American, you can still provide your voice.

Noncompete clauses are terms that say “if you leave this job, you can’t work for anyone else in the industry for...” in my mother’s case back in the 1970s, it was three years. Sometimes there’s a certain geographic radius.

Like many ridiculous things, it started with an understandible motive: The original idea was to prevent competing businesses from stealing company secrets by hiring competitors’ employees who had access to those secrets. Say, an engineer who knew the plans for a new product or a high-level exec who knew the business strategy for the coming year. But many of the companies using these clauses today are requiring them of all employees even if they don’t know anything confidential. The examples in this New York TImes article are a hairdresser, a doctor, and a car part salesperson. That means that the upshot of a noncompete today is not to protect an employer’s presumably hard-won intellectual property but to prevent employees from leaving and punish them if they do.

You know what I always say: Capitalism needs to be regulated to work. The core concept is that workers should compete for the best jobs and employees should compete for the best workers, which at least in theory means that employers have an incentive to pay well and provide non-toxic workplaces. These kinds of noncompete clauese create an artificial barrier to that. Healthy workplaces are a liberal value. Hard work and competition are conservative values. We should all be able to get behind this one.

When I was working freelance, I found clients trying to get me to sign contracts with noncompete clauses that could be interpreted as barring me from taking any other work even if they were not offering me full-time hours. Noncompete clauses have gotten out of hand.

[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!

[bright-and-burning]

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

[bijillion]

human pet guy is saying ex-twitter employees should be hunted down for going to workfor threads

[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. 

[mostlysignssomeportents]

Union pensions are funding private equity attacks on workers

On October 7–8, I'm in Milan to keynote Wired Nextfest.

If end-stage capitalism has a motto, it's this: "Stop hitting yourself." The great failure of "voting with your wallet" is that you're casting ballots in a one party system (The Capitalism Party), and the people with the thickest wallets get the most votes.

During the Cultural Revolution, the Chinese state would bill the families of executed dissidents for the ammunition used to execute their loved ones:

https://www.quora.com/Is-it-true-the-Chinese-government-makes-the-families-of-executed-people-pay-for-the-cost-of-bullets

In end-stage capitalism, the dollars we spend to feed ourselves are used to capture the food supply and corrupt our political process:

https://pluralistic.net/2023/10/04/dont-let-your-meat-loaf/#meaty-beaty-big-and-bouncy

And the dollars we save for retirement are flushed into the stock market casino, a game that is rigged against us, where we are always the suckers at the table:

https://pluralistic.net/2020/07/25/derechos-humanos/#are-there-no-poorhouses

Everywhere and always, we are financing our own destruction. It's quite a Mr Gotcha moment:

https://thenib.com/mister-gotcha/

Now, anything that can't go on forever will eventually stop. We are living through a broad, multi-front counter-revolution to Reaganomics and neoliberal Democratic Party sellouts. The FTC and DOJ Antitrust Division are dragging Big Tech and Big Meat and Big Publishing into court. We're seeing bans on noncompete clauses, and high-profile government enforcers are publicly pledging never to work for corporate law-firms when they quit public service:

https://pluralistic.net/2023/09/09/nein-nein/#everything-is-miscellaneous

And of course, there's the reinvigoration of the labor movement! Hot Labor Summer is now Perpetual Labor September, with 75,000 Kaiser workers walking out alongside the UAW, SAG-AFTRA and 2,350 other groups of workers picketing, striking or protesting:

https://striketracker.ilr.cornell.edu/

But capitalism still gets a lick in. Union pension plans are some of the most important investors in private equity funds. Your union pension dollars are probably funding the union-busting, child-labor-employing, civilization-destroying Gordon Gecko LARPers who are also evicting you from the rental they bought and turned into a slum, and will then murder you in a hospice that they bought and turned into a slaughterhouse:

https://pluralistic.net/2023/04/26/death-panels/#what-the-heck-is-going-on-with-CMS

Writing for The American Prospect, Rachel Phua rounds up the past, present and future of union pension funds backing private equity monsters:

https://prospect.org/labor/2023-10-04-workers-funding-misery-private-equity-pension-funds/

Private equity and hedge funds have destroyed 1.3 million US jobs:

https://united4respect.org/press-release/people-who-work-at-walmart-sears-amazon-formerly-toys-r-us-more-join-forces-together-as-united-for-respect-2-2-2-2-5-3/

They buy companies and then illegally staff them with children:

https://www.dol.gov/newsroom/releases/whd/whd20230217-1

They lobby against the minimum wage:

https://pestakeholder.org/wp-content/uploads/2021/04/Insire-Brands-memo-on-15-wage.pdf

They illegally retaliate against workers seeking to unionize their jobsite:

https://www.hoteldive.com/news/dc-hotel-workers-enlist-us-representatives-to-fight-sofitel-union-busting/650396/

And they couldn't do it without union pension funds. Public service union pensions have invested $650 million with PE funds. In 2001, the share of public union pensions invested in PE was 3.5%; today, it's 13%:

https://docs.google.com/spreadsheets/d/1B0vv26VEFmwtfw5ur6dSDMY8NftvZKij/

Giant public union funds like CalPERS are planning massive increases in their contributions to PE:

https://www.calpers.ca.gov/page/newsroom/calpers-news/2023/calpers-preliminary-investment-return-fiscal-year-2022-23

This results in some ghastly and ironic situations. Aramark used funds from a custodian's union to bid against that union's members for contracts, in an attempt to break the union and force the workers to take a paycut to $11/hour:

https://www.bloomberg.com/news/articles/2012-11-20/pension-fund-gains-mean-worker-pain-as-aramark-cuts-pay

Blackstone's investors include the California State Teachers Retirement System (CalSTRS). The PE ghouls who sucked Toys R Us dry were funded by Texas teachers.

Then there's KKR, one of the most rapacious predators of the PE world. Half of the investors in KKR's Global Infrastructure Investors IV fund are public sector pension funds. Those workers' money were spent to buy up Refresco (Arizona Iced Tea, Tropicana juices, etc), a transaction that immediately precipitated a huge spike in on-the-job accidents as KKR cut safety and increased tempo:

https://www.osha.gov/ords/imis/establishment.inspection_detail?id=1675674.015

Petsmart is the poster-child for PE predation. The company uses TRAPs ("TrainingRepaymentAgreementProvision") clauses to recreate indentured servitude, forcing workers to pay thousands of dollars to quit their jobs:

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

Why would a Petsmart employee want to quit? Petsmart's PE owner is BC Partners, and under BC's management, workers have been forced to work impossible hours while overseeing cruel animal abuse, including starving sick animals to death rather than euthanizing them, and then being made to sneak them into dumpsters on the way home from work so Petsmart doesn't have to pay for cremation. 24 of BC Partners' backers are public pension funds, including CalSTRS and the NYC Employees' Retirement System:

https://prospect.org/culture/books/2023-06-02-days-of-plunder-morgenson-rosner-ballou-review/

PE buyouts are immediately followed by layoffs. One in five PE acquisitions goes bankrupt. Unions should not be investing in PE. But the managers of these funds defend the practice, saying they "facilitate dialog" with the PE bosses on workers' behalf.

This isn't total nonsense. Once upon a time, public pension fund managers put pressure on investees to force them to divest from Apartheid South Africa and tobacco companies. Even today, public pensions have successfully applied leverage to get fund managers to drop Russian investments after the invasion of Ukraine. And public pensions pulled out of the private prison sector, tanking the valuation of some of the largest players.

But there's no evidence that this leverage is being applied to pensions' PE billions. It's not like PE is a great deal for these pensions. PE funds don't reliably outperform the market, especially after PE bosses' sky-high fees are clawed back:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3623820

Pension funds could match or beat their PE returns by sticking the money in a low-load Vanguard index tracker. What's more, PE is getting worse, pioneering new scams like inflating the value of companies after they buy and strip-mine them, even though there's no reason to think anyone would buy these hollow companies at the price that the PE companies assign to them for bookkeeping purposes:

https://www.institutionalinvestor.com/article/2bstqfcskz9o72ospzlds/opinion/why-does-private-equity-get-to-play-make-believe-with-prices

To inject a little verisimilitude into this obvious fantasy, PE companies sell their portfolio companies to themselves at inflated prices, in a patently fraudulent shell-game:

https://www.ft.com/content/646d00f4-af5d-4267-a436-54fb3bc1697b

What's more, PE funds aren't just bad bosses, they're also bad landlords. PE-backed funds have scooped up an appreciable fraction of America's housing stock, transforming good rentals into slums:

https://pluralistic.net/2022/01/27/extraordinary-popular-delusions/#wall-street-slumlords

PE is really pioneering a literal cradle-to-grave immiseration strategy. First, they gouge you on your kids' birth:

https://pluralistic.net/2021/10/27/crossing-a-line/#zero-fucks-given

Then, they slash your wages and steal from your paycheck:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3465723

Then, they evict you from your home:

https://pluralistic.net/2023/06/05/vulture-capitalism/#distressed-assets

And then they murder you as part of a scam they're running on Medicare:

https://pluralistic.net/2023/08/05/any-metric-becomes-a-target/#hca

As the labor movement flexes its muscle, it needs to break this connection. Workers should not be paying for the bullet that their bosses put through their skulls.

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/2023/10/05/mr-gotcha/#no-ethical-consumption-under-capitalism

My next novel is The Lost Cause, a hopeful novel of the climate emergency. Amazon won't sell the audiobook, so I made my own and I'm pre-selling it on Kickstarter!

[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.”

[deluxewhump]

…..did they really just ban most noncompete clauses

[sonnykissed]

Yooo so the federal government just passed a law saying it’s illegal for companies to force noncompete clauses on workers.

I wonder how this will influence the wrestling world, as the legislation covers ALL SECTORS OF EMPLOYMENT

But in WWE and some AEW talent are independent contractors so I’m curious what’s the loophole there

[stanfave2]

FTC bans employers from using noncompete clauses | CNN Business

[partisan-by-default]

US judge will not block Biden administration ban on worker 'noncompete' agreements

A federal judge on Tuesday rejected a bid by a tree-trimming company to block a U.S. Federal Trade Commission rule from taking effect that would ban agreements commonly signed by workers not to join their employers' rivals or launch competing businesses.

U.S. District Judge Kelley Hodge in Philadelphia said in a written decision that the FTC, which enforces federal antitrust laws, has the power to ban practices that it deems anticompetitive, including the use of so-called noncompete agreements that curb competition for labor.

Hodge, an appointee of Democratic President Joe Biden, denied a bid by ATS Tree Services to block the rule pending the outcome of its lawsuit.

About 30 million people, or 20% of U.S. workers, have signed noncompetes, according to the FTC.

A federal judge in Texas earlier this month blocked the FTC from enforcing the rule against a coalition of business groups including the U.S. Chamber of Commerce, the country's largest business lobby, and tax service firm Ryan, while they pursue legal challenges.

FTC spokesperson Douglas Farrar said the decision "fully vindicates" that the law allows the agency to ban noncompete clauses, "which harm competition by inhibiting workers' freedom and mobility while stunting economic growth."

[literaticat]

Hi Jenn! I have a question about noncompetes for publishing. I know you don't really want to compete with yourself, but how close is too close? If I had a book deal (as a debut) for a 50k MG contemporary fantasy, could I also then go on sub with a 40k MG horror before the fantasy is pubbed? Or are they too similar? Is this something you'd advise your clients against?

It depends. (SORRY, BUT IT ALWAYS DEPENDS, FOR GOODNESS SAKE!) Obvs I don't know you or your particular situation, but here are some of the things you will want to take into account:

The most important piece: Look at the contract. There are a couple places where the Publisher A contract might deffo trip you up:

-- THE OPTION. What does the option clause say? If it says that Publisher A will have the first opportunity to look at your next book, or even your next Middle Grade book, then obviously you will have to offer it to them first. And when you can offer it to them will vary (but will be specified in that clause) -- probably no sooner than after acceptance of the first book (ie, it's totally done, no more editing), but possibly after publication of the first book. Knowing what they expect and what the timeline is will be vital.

-- NONCOMPETE. There is probably a clause in your contract that says something about "non-competition", though it could be worded a little differently. It will likely have restrictions, perhaps something like you won't sell another book that might conflict with delivery of this book, or possibly that you won't sell another book that will publish before this book, or within X-number of months of this book. Though this might be annoying, it's actually to your benefit as well -- you don't WANT two books that will compete with one another to come out on the same season!

Even if neither of these clauses are a problem in the first contract, just think about the logistics. You must realize that if Publisher A bought the book as a Debut Book, they will want it to be... your debut book. Yes? So clearly, going out on sub with another book before this book publishes, there might be a problem -- let's say the Fantasy got bought in early 2024 and will publish in Fall 2025. Well, if you then sell another book to Pub B a handful of months later, and they ALSO want to publish in Fall 2025, that's potentially a problem -- Pub A won't love it, and you will have to be editing and copyediting and promoting two books at the same time, which YOU won't love, and whatever audience that you have that might have been keen to buy a book from you might well be split. If one is a PB and one is a MG, that's less of a problem -- but two MG? That feels uncomfy to me.

Additionally, just from an etiquette perspective, even if there is no option, I would PRESUME that Publisher A is keen to grow you as an author and might feel slighted if you turned around and sold something to somebody else without even giving them the opportunity to look at it. (Again, if it's a COMPLETELY different kind of book, that they don't even do -- much less of a problem. But another book that they WOULD potentially publish? Just... why???)

TO ME, much better would be to start with the Fantasy book, and at the appropriate time, see if Pub A wants to follow up with another Fantasy or if they might be into the horror. If they want to follow up with another fantasy, you get cracking on that and meanwhile perhaps sell the Horror elsewhere -- and your agent would want to make sure that it can go something like "Pub A Fantasy Novels: Spring / Pub B Horror Novels: Fall" -- so that none of those will conflict with the others, and you can have plenty of time to do all the editing, promoting, etc, without the books being absolutely on top of one another.

(Because real talk: As much as you currently think "this is easy, no problemo, I can TOTALLY do two books at once" -- the reality is, you think that because the hard part hasn't started yet. When you have MULTIPLE books stacked up, it WILL create a problem for you. With a staggered strategy, once you are on Book 2 or 3 with both publishers, you'll be drafting one, editing one, copyediting the next, promoting another -- that is PLENTY OF WORK. Without a staggered strategy, you'll be in HELL.)

[silentauthor96]

Rare Working Class win in the US!! (source)

Fun fact: a lot of fast food and other low-wage jobs in the US would have (technically unenforceable) noncompetes in contracts to scare employees from trying to seek better positions at similar restaurants 🙃

And as a personal story, a noncompete clause led to my mother being trapped in multiple toxic work environments for years because she couldn't afford to take on the corporate legal team of the largest insurance provider in our state, even though multiple lawyers agreed they didn't have a good case.

This rule change received over 26,000 public comments and passed 3-2 on party lines - public comment AND voting made this change possible.

Just a reminder: when we fully participate in this democracy, we can make the system work for us.

[mareastrorum]

Oh shit.

The rule will be effective 120 days from today, on August 21, 2024.

The final rule (570 pages) can be found here:

I trudge through Medicare regulations all the damn time. I have never encountered a rule where the footnotes get over 1000, letters alone 1200. This was an intricately designed ruling and I’m amazed at how robustly it was constructed given how short the actual rule is. Here is the meat of it (starting on page 561):

There are a few more short subsections on existing agreements and notice to affected employees, of course. Here are some examples of the comments that led the FTC to approving this final rule:

Note: This final rule applies specifically to clauses (usually in employment agreements) that limit employees’ ability to work in the same field in a particular geographic area. It does not change the enforceability of non-disclosure agreements (keeping secrets), IP assignment agreements (from publishing to transfers to work-for-hire), or similar agreements.

This doesn’t affect some populations as much as others. In California, Minnesota, Oklahoma, and North Dakota, non-competes were already banned in general (with few exceptions).

Overall, this is an incredible development. It’s going to help a ton of people in a wide number of industries across every paygrade. I’m certain it will be challenged in court, but at first glance, there is some solid ground work already laid to defend it.