FTC Moves to Ban Noncompetition Agreements

[ClydeR]

This is big! Good or bad?


On January 5, 2023, the Federal Trade Commission released a Notice of Proposed Rulemaking (NPRM) to prohibit employers from imposing noncompete clauses on workers. True to their name, noncompetes block people from working for a competing employer, or starting a competing business, after their employment ends. Evidence shows that noncompete clauses bind about one in five American workers, approximately 30 million people. By preventing workers across the labor force from pursuing better opportunities that offer higher pay or better working conditions, and by preventing employers from hiring qualified workers bound by these contracts, noncompetes hurt workers and harm competition.

Noncompete clauses significantly reduce workers' wages. When employers use noncompete clauses to restrict workers from moving freely, they have the power to suppress wages and avoid having to compete to attract workers. Based on existing evidence, noncompete clauses also reduce the wages of workers who aren't subject to noncompetes by preventing jobs from opening in their industry. According to FTC estimates, the proposed rule could increase workers' earnings across industries and job levels by $250 billion to $296 billion per year. Researchers also find that banning noncompetes nationwide would close racial and gender wage gaps by 3.6 - 9.1 percent.

More... PDF (https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete_nprm_fact_sheet.pdf)

[Gelston]

This would be huge in the Medical industry.

[Seran]

This is big! Good or bad?

Awaiting the inevitable GOP hyperventilating over anything that'd increase employee mobility and freedom.

[Suppa Hobbit Mage]

I'll play devils advocate, simply because I honestly don't care one way another on this.

But... lets say I'm am a software developer at a tech company, and there is another tech company in the exact same industry developing the exact same software. I decided to leave company A and go work for company B. My work at company A is owned by company A, but if there is no non-compete, can I just take all that knowledge from Company A and share it with Company B, to the detriment of Company A? Are there no protections for companies?

Let me simplify it even more. Say company A is a pizza company (just a mom and pop, no franchise) with a secret sauce and every one loves it and they are successful. I get salty, leave company A and go work for competitor Company B and tell them the secret sauce, and Company b puts A out of business because they have 3 stores and A only has their little one. Is there no protections for poor little company A?

I know my answer to both examples. Curious what yours are.

[Methais]

This is big! Good or bad?

It's bad but only because you posted it.



Awaiting the inevitable GOP hyperventilating over anything that'd increase employee mobility and freedom.

Shut up loser this thread is about job/work related stuff, something you don't know anything about.

The irony of your statement though when it was democrats like you pushing for people to lose their jobs/careers over covid vaccines.

[Seran]

I'll play devils advocate, simply because I honestly don't care one way another on this.

But... lets say I'm am a software developer at a tech company, and there is another tech company in the exact same industry developing the exact same software. I decided to leave company A and go work for company B. My work at company A is owned by company A, but if there is no non-compete, can I just take all that knowledge from Company A and share it with Company B, to the detriment of Company A? Are there no protections for companies?

Let me simplify it even more. Say company A is a pizza company (just a mom and pop, no franchise) with a secret sauce and every one loves it and they are successful. I get salty, leave company A and go work for competitor Company B and tell them the secret sauce, and Company b puts A out of business because they have 3 stores and A only has their little one. Is there no protections for poor little company A?

I know my answer to both examples. Curious what yours are.

In both options, the individual who takes the information can be found guilty of theft of intellectual property or unlawful dissemination of trade secrets belonging to their former employer. Let us not forget US trademark and patent laws which apply to tangible items which have been registered. Nondisclosure agreements are additional industry standards as a condition of employment.

The only thing non-compete agreements do is make it so an individual is unable to leave their employer as no others in the industry or market they've obtained relevant experience are able to hire them. This is economic slavery.

[ClydeR]

I'll play devils advocate

I always suspected.

I'll give you another problematic example, which in no way constitutes advocating for the devil. The FTC announcement says that it will apply to existing non-compete agreements. Let's say you're an employer. You hire a valuable employee and pay him $100,000 to sign a non-compete that will expire two years after he leaves your employ. The $100,000 payment is in addition to his nice annual salary. Then the FTC says that your non-compete agreement is invalid.

Did you, as an employer, just lose $100,000?
Or should the employee have to repay it?
Or is it unconstitutional for the government to interfere with your existing private contract in this way?

More subtly, doesn't every employment agreement containing a non-compete include some additional compensation to the employee in exchange for the non-compete, even if the additional compensation is not separately quantified as it was in my above example?

This rule will probably end up at the Supreme Court before it takes effect. That will take two or three years.

[Parkbandit]

It's bad but only because you posted it.

Shut up loser this thread is about job/work related stuff, something you don't know anything about.

The irony of your statement though when it was democrats like you pushing for people to lose their jobs/careers over covid vaccines.

In Seran's defense, he's never had to deal with a non-compete clause.

Personally, I like them as an employer but do not like them as an employee.

As an employer, I have put forth the time, money and effort to train someone in a specific field.. I don't want them to quit and go to my competitor with the knowledge and experience I paid for.

As an employee, I shouldn't be prevented from getting a better paying job in my field for x number of years.

[Suppressed Poet]

In my industry and specifically the big business players, I’ve only seen it enforced very rarely. In those rare cases it was enforced it was because the employee was strategically & intently poaching clients or sharing highly sensitive trade secrets / data. That’s just my own personal experience and observation though.

I say leave that for the individual states to decide if they would like to legislate that or not.

[Realk]

In those rare cases it was enforced it was because the employee was strategically & intently poaching clients or sharing highly sensitive trade secrets / data.

Insurance is a huge one that comes to mind.

[Seran]

In my industry and specifically the big business players, I’ve only seen it enforced very rarely. In those rare cases it was enforced it was because the employee was strategically & intently poaching clients or sharing highly sensitive trade secrets / data. That’s just my own personal experience and observation though.

I say leave that for the individual states to decide if they would like to legislate that or not.

Full faith and credit in the Constitution establishes that if a company whose draconic laws would effect an employee who moves to another state without said laws, provided a judicial action was taken. This is why a federal rule or law would take precedence.