https://www.npr.org/2024/04/23/1246655366/ftc-bans-noncompete-agreements-lina-khan
The Federal Trade Commission narrowly voted Tuesday to ban nearly all noncompetes, employment agreements that typically prevent workers from joining competing businesses or launching ones of their own.
Yeah, even hotel housekeepers sign papers saying they cannot quit and go to work for competitors these days.
How recent is this? I'm asking because about 10 years ago, I worked for a local TV station owned by a massive media company and not only did I not sign a non-compete, I left them for a better paying job at the other local TV station owned by a different massive media company and they didn't make me sign one either.
Both jobs were utter shit, by the way. I'm not defending them or the shitty stations or the shitty companies. I'm just surprised.
Idk I was making a metaphorical analogy, I'm neither a housekeeper nor a housekeeping data analyst.
I've had places try to make me sign a non-compete agreement as a chef. I straight up told them that their agreement wasn't even useful as toilet paper. Signed anyway, and worked for them for a few months, then moved on to a better paying job.
100%. These non-competes essentially lock employees in to their existing employer, unless they want to find a job in a completely unrelated sector (and likely take a massive payout, which, especially these days, is near financial suicide). This will have enormous ramifications for companies with toxic culture, as now people don't have to put up with their crap. This allows for freedom of economic mobility, and more control of one's own life.
I disagree. If you're in a place in life to take a position requiring a non-compete, you probably already knew it was unenforceable. We're not talking teens with their first jobs here.
OTOH, I strongly agree that this is a great thing for workers. Really can't believe it happened!
It was my understanding is that non-competes are a grey area and depended on the context. For an example, an indefinite non-compete clause isn't enforceable, but a 6 month clause might be. A non-compete clause for someone working in a highly-specialized position where they're working with trade secrets, confidential information or patented technology might be enforceable, but a non-compete clause for a normal web developer probably isn't. If you're in Texas then it's more likely to be enforceable, but if you're in California then it might not. If you're trying to work 2 jobs for competing companies then it would probably be enforceable, but if you get fired and immediately go work for another company then it's unlikely they could enforce it.
That was my understanding anyway.
A non compete clause should be justified, limited in time, limited geographically AND be compensated.
This is the regulation in France. A person who has a non compete clause should receive a financial compensation for the duration of the clause, usually between 25% and 50% of their salary.
This way to do seem fair to me
Eh, I don't know if everyone actually knows that they're unenforceable. I've never dealt with one of these, so I'll admit that I'm shooting from the hip, but I'd guess that usually a non-compete comes with what I'd imagine to be a pretty decent salary and benefit package, so I could see it being a tradeoff people will take despite not knowing what the company is like as they're pretty jazzed on the money aspect. Plus, if a former employer were to take you to court, you probably would still want legal representation even if a judge throws it out, which will still cost you a pretty penny. But again, I don't have any first-hand experience in this regard.
Read above. Hotels are currently making housekeeping staff sign noncompetes. That is not a “place in life you know it’s unenforceable”, especially considering the number of housekeeping staff that are immigrants.
You want to keep your employees? Make their job more attractive.
you probably already knew it was unenforceable
But that’s not true. They were potentially enforceable (outside California), and even finding out risked a high cost of legal assistance. It was too risky to simply ignore, even if they shouldn’t be enforceable. The corporation claiming it, making you sign it, and employing a legal team to back it up does mean sometimes people won’t risk it
When places talk about how they’ll be “the next Silicon Valley” this is one of the reasons none of them have actually managed it. In CA people in many cases can take a good idea that their employer doesn’t want and do something with it themselves. In most other places it will get so tied up in non competes that it’s not worth the effort to even try.
And it’s not just tech, here in Colorado we recently had a restaurant try and shut down another restaurant simply because the newer place’s chef had worked at the older place. They settled but it’s so entirely ridiculous that it could have even started court proceedings in the first place.
Forget ideas, just normal worker mobility. A couple of years ago I switched jobs.
The old company had gotten bought by a conglomerate and they were milking the product line by stopping development, stopping raises, and letting attrition do its thing. Time to leave. One of my peers found a great company still investing in their products and jumped ship. Me too. However we both had noncompetes specifically prohibiting “poaching”, so could we even talk to co-workers? Everyone lost because of this noncompete. New company missed out on potential new hires, co-workers missed a potential opportunity, and even old company attrited slower than otherwise so less profit
This is a classic case of noncompetes blocking worker mobility, hurting everyone
I’m going to go against the crowd and say that while I think it’s a good move to make it official non competes were effectively already declared unenforceable via the court system. It’s rarely used for the average worker unless something truly fucky was going on and the courts would usually side with the employee no matter what unless something truly fucky was going on.
Even if unenforceable, they likely had a huge chilling effect. Most people understandably prefer not risking going to court, even if they're in the right.
Right, I can’t afford to take a corp to court, even if I would win.
I can’t afford to have my new employer balk at hiring me if they don’t want to risk defending themselves, even if it doesn’t happen often
The threat of lawsuit is usually enough to get an employment offer rescinded. It's rare for a company to want to take on a legal defense just to hire someone new. Even though they weren't actually legally binding, non-competes still limited options for a lot of people.
Overall I agree with you that this isn't as big of a deal as people make it sound, but it's easy underestimate their influence if only looking at the result of cases that go to trial. In many situations, the damage is done well before a case can go to trial.
Is this a big deal in terms of allowing people to more easily quit their jobs and take new ones? Yes.
Is this a big deal in terms of boosting innovation and economic productivity by allowing ideas to move more freely between businesses? Maybe.
Is this a big deal in terms of harming businesses or causing radical shakeups at businesses? No. States like California already ban non competes as do most western countries, companies just keep on going, truly proprietary innovations are already going to be covered by NDAs.
Is this a big deal in terms of allowing people to more easily quit their jobs and take new ones?
Now do healthcare.
What gets me is how controversial things like this are in the US. Non-competes are antisocial, because they blunt one of the few mechanisms capitalism has to keep employers in check -- labor market mobility. One of the things that's supposed to make capitalism kind of okay is the fact that "if you don't like it, you can go elsewhere." Well, if you're not allowed to start a business or get another job in your line of work for like years after you leave, how the hell are you supposed to actually do that? How does the labor market route around bad employers when workers are literally trapped?
Way I see it, a non-compete is just an employer's way of telling you they'd keep you trapped in a box in your off-hours if they could.
My country has non-competes in the most sensible way: if you don't want the employee to go to a competitor, you must pay him what he could earn at the competitor during the duration of the non-compete. Employee quits? He can either join the competitor or you can pay him as long as you want him away from the competitor.
Will employers still put non-applicable non-competes? They sure do and I smile when I see those baseless clauses. Have they tried enforcing them at the "work tribunals" (free for the employee), yes they have and they've been laughed off by the judges.
Is it controversial? The only support I’ve heard for them comes from corps, sleazy executives looking to control their employees. Everyone else is like”meh, clearly unfair and should be illegal but I can’t do anything about it and still have a job”
From the article it's getting very heavily opposed by the chamber of commerce, so
Maybe not controversial among, like, people, but
Another commenter in this thread noted that the chamber of commerce is just a right wing lobby group, completely separate to the department of commerce. Not sure if you know that already, but I think it basically aligns to the view of the comment you replied to.
Yeah. Mine did too, in that they're not, like, people. But it's controversial as far as lawmakers and judges go
I think my point was that the chamber of commerce are not lawmakers or judges, but people representing corporate interests
Gotcha, yeah. I get that. They're just lobbying the lawmakers and cetera, causing controversy.
Unfortunately, there is a strong implication in American culture that your worth as a human being scales directly with your productivity + net worth. Rich people are intelligent and to be admired
Now take all that stuff that you pointed out as bad, and add on the fact that your healthcare typically comes from your employer too!
You probably don’t even need me to tell you that the right wing media in this country would immediately kick into gear and start programming their base to hate the idea of labor market mobility and the market routing around bad employers. Those people ARE the bad employers!
Before long they're going to start floating some modern version of an indenture contract for service workers and arguing for the reinstatement of serfdom.
Oh yeah, and they would be going for it right now if they thought they could get away with it.
I mean, how could you not appreciate your employer-provided housing and convenience stores? They’re right next to where you work. You don’t even need a car!
Non-competes are antisocial, because they blunt one of the few mechanisms capitalism has to keep employers in check -- labor market mobility
Hence the chamber of commerce threatening legal action.
If businesses can't abuse the workers, how can they continue to set new profit records every month? Won't someone think of the poor CEOs?
I remember my last job had a Non compete. I was a handy man. Non competes for NBA players and wealthy CEOs, fine. But non compete for just regular people doing regular jobs is crazy. Once I leave my current job, my ex employer should have no say in where I work afterwards.
That's just so they can treat you like crap and under pay you, so that you can't just go be a handy many somewhere else. If you lived in California it would have already been unenforceable anyway though.
It's fine for them because they're being paid tens and hundreds of millions. And they can easily reject the contract and not sign. Don't act like a cleaning lady and an NBA player are in the same boat
And if your employer doesn’t want you working elsewhere, they should put you on garden leave.
Executives make some sense because they made deciding the direction of companies, and can take “unfair advantage”.
Athletes, no. They bring mostly their own talent and effort, and that’s also what they bring to a new team. They are only employable by doing the same thing for someone else, and likely in the same league: literally competing . Non-competes don’t make any more sense for athletes than they do for baristas
Canadian here. I had one for working in a call centre ffs. And afaik we don't have laws against it. :(
Huh? What are you even getting offended at? Are you just seeking out things to be mad at?
Offended? Why? I'm just saying that if this is true, then "big sport" is more broken than I imagined. And that chess is good sport that does not have such bullshit.
Don't worry. The supreme Court will find a reason that their existence is unconstitutional soon
I mean they haven't just dismantled entire agencies yet. The closest they've done is lean on a pretty basic idea - the rule making power those agencies have is power that belongs to Congress and is narrowly delegated to the agencies by Congress.
This means that such agencies cannot make rules that contradict legislation passed by Congress and can only make rules within the span of things delegated to them and no further (because Congress only delegated the power that Congress actually delegated and nothing more, even if it is related or feels like it should fall under their remit based on the name of the agency). Hence why the FCC can place controls on the content of radio or broadcast TV but has no say over the content of cable TV or streaming services - their power over the former is tied to their control and licensing of the use of the airwaves as a public commons (which they were delegated pretty broad authority over) which simply doesn't apply to cable or streaming.
This sounds awesome, but I will say that I'm a bit concerned about whether or not the Supreme Court will let this stand. I'm speculating that the Supreme Court may strike it down and say that the FTC doesn't have jurisdiction and that non-compete clauses should be handled by the Department of Labor or something like that. Imo it could fall under either department because the FTC is meant to tackle anti-trust measures, and non-compete clauses could be seen as a form of monopolistic behavior (restricting competition).
At the same time, however, non-competes have to do with labor practices, which is why I could see the Supreme Court saying that it's something the DoL should enforce, and because (afaik at least) the DoL only has the power to enforce legislative regulation, we'd end up back where we started: waiting for Congress to get their shit together and actually do something instead of sitting around and picking fights or virtue signalling.
I hope I'm wrong though. I'd like it if our Supreme Court would let us have nice things every now and then.
What you are talking about is colloquially called Chevron Deference. And yes, it is on the kill list after Roe, Obergefell, and I can only assume Brown v Board ffs.
Not after, before (well maybe after Roe since that's already gone).
Chevron deference is already on the chopping block, and very well might be gone by the end of the current SCOTUS term. And nobody seems to know or care.
I wonder if they might hesitate on it. Getting rid of Chevron Deference cuts both ways. Conservative justices can shoot down agency decisions, but so can liberal justices. It only makes sense for conservatives to do it if they think they can control the justice system at every level indefinitely.
They might have been feeling that way under Trump, but they might not be feeling that way anymore, and definitely won't if Trump misses reelection.
Or at least create SCOTUS terms, maybe. Does that do anything? Who could know such things. We need to do something though. The conservative justices aren't legal activists, they are legal evangelicals.
Wouldn't Department of Labour ban ALL of them instead "almost all"?
EDIT: Really? Why downvote? Wouldn't any sane Anything of Labour ban noncompetes when court explicitly says it is their jurysdiction?
The one's that aren't banned are for senior executives. Which is the one place where non-competes make sense. It's not anything that really matters.
This is covered in the article, which is probably why you're getting downvoted.
It would come down to exactly what authority has been granted to the FTC by Congress and whether or not this falls under that. And not a broad strokes description, but just what power Congress actually delegated to them and no further. The recent EPA cases are examples of that in action.
If you were as confused by this as I was:
Shortly after the vote, the U.S. Chamber of Commerce said it would sue the FTC to block the rule
The US Chamber of Commerce is a right-wing lobbying group for businesses, unrelated to the US Department of Commerce which is an actual government agency.
https://en.m.wikipedia.org/wiki/United_States_Chamber_of_Commerce
In some countries this has long been handled by requiring that non-competes are only enforceable if the employer employee keeps on getting paid during the non-compete period.
Want to restrict my freedom of trading my work, pay up!
I always thought non-competes were total bullshit anyways. Like a scare tactic or something. And unenforceable.
Didn't matter and sure doesn't now.
They probably were, but to find out you'd have to go to court, and your average person doesn't want to do that.
It's doesn't matter if you want to go to court. Your future employer doesn't want to go to court on behalf of a new hire, so they won't hire you in the first place.
I had a non-compete handed to me when I lived in California. I laughed my ass off and signed it. When I left the dumbass VP of HR threatened me with it.
My response was "Could you pretty please try to enforce it? My lawyer would absolutely love to represent me in court. FYI you know my lawyer. He was the paralegal that told you the non-compete contract wasn't legal. You then screwed him over and got him laid him off. Guess who passed the bar exam 6 months ago!"
For those not familiar and missing context, California prohibited noncompetes prior to the federal prohibition.
They are illegal in sane countries. Sadly, my country(Russia) is not very sane, so they are only unenforcable here. At least as far as I know.
Agreed, though arbitration isn't absolutely enforceable. If you can't reach an agreement through it you can always still sue. It'll just cost ya.
I have been told (by my attorney) that arbitration is sometimes more expensive than filing suit. IIRC, the rationale is that arbitration can have very high fees and involve a large number of people. It was in the context of drawing up a boilerplate nda, but it has been awhile and I don't remember the details.
Lovely. Deterring people from claiming damages by making it have a high barrier of entry or financially stupid to follow through with. Not to mention, using an arbitration agreement to make it risky to start class-action lawsuits and obscure visibility so nobody else knows they could get compensation from a company's misdeeds.
In other words, fuck the consumer. That sounds about right.
This is by no means in defense of the practice, but I remember taking a doctor's de bene esse deposition, and afterwards he goes to the taking attorney "Hey, you're paying me more than this case is worth, what gives?" And the attorney said the carrier is trying everything in an effort to deter people filing lawsuits for easy 5-10k payouts. I understand the rationale, but it still sucks.
Would this also apply to a contracting agency that has a noncompete document that had to be signed by their contractor employees?
The noncompete is so that the contracting employee can't end the contract early and then be hired directly by the company they were being contracted to. At least not for at least a year after ending the contract unless the length of the contract was completed in full.
Edited for clarity
I think so, yes. If you read the actual rule (https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf) it says a noncompete is something against "seeking or accepting work in the United States with a different person". Since you're working in the first part with a contracting agency, and then going to work with a different company, the rule seems applicable here.
I'm not sure why they use "person", but I'm assuming your W-2 or 1099 would have different companies, and the different companies would have different presidents/CEOs/chairmen, so it would objectively be different both in the general legal Romney-style "corporations are people" person and the literal dictionary person.
I’m not sure why they use “person”, but I’m assuming your W-2 or 1099 would have different companies
Yes, those documents list the contracting agency as the company one is working for, rather than the company one is being contracted out to.
That's exactly what a non-compete is. Your job can no longer stop you from quitting and working for a competitor.
Not a competitor, but the company you were working at with the contracting agency. Basically trying to stop being a contractor and trying to be hired directly as a colleague.
Of course, if the company made you sign the non-compete clause, and you try to get hired directly by the company that made you sign it, they could just establish a internal rule saying "don't hire contractors". Nothing is forcing them to hire you.
I think you misunderstood. The contracting agency has the noncompete clause in their contract. To prevent you from being able to cancel your contract part way through and get a real job at the company you're being contracted out to.
Ah, like a job finding firm that sets you up, takes a percent of the pay - and if you just quit and join the company directly they loose their cut?
Yes, exactly. They have a separate clause in their contract that makes it so you can't be hired at the company you're being contracted to until you're most of the way through your contract (or the company has to pay the contracting agency a decent chunk of change if they really want to hire you on early).
And the noncompete is an additional document to prevent you from just ending your contract early and applying for the real position at the company without that issue.
Basically the contracting agency trying to get as much money as possible. Even while offering the most minimum of worker benefits they can legally manage.
I'm not a lawyer, but I'd imagine that would also be banned. You'll have to see if you get a notice from the agency
I think he's asking about temp to hire, the employee being given an offer, but only if they quit and quit looking through the temp to hire agency, then get picked up by the company they were working for (before the 1 year that the temp to hire would be collecting commission on)
But I don't have the foggiest what the answer would be
The answer is "fuck em". If your business model requires restricting the rights of people, your business shouldn't exist
They can still function as a staffing agency...
Basically yes but I get the impression he means more than labor or basic admin, which I'm not too familiar with. For the basic stuff I believe the company pays the temp agency a small fee. From what I've seen the temp agency doesn't really care about retaining people so they just roll with it.
Basically a lot of the low level jobs are contractors. And you can eventually be hired by the company as a colleague once your contract is up. The contracting agency, however, put in a noncompete clause so that the contractors can't end their contract early in order to apply for that company's colleague position.
Isn’t that scenario a dispute between the contracting company and its customer? How is the employee even involved? Contracting company should have a term in their contract with their company how to handle that situation
Is this what they make you sign that says
"You can't join any company that is in the same industry or has the same customers for 2 years after leaving the present company"
?
Lol what. That doesn't make any sense. Are you supposed to just sit for 2 years doing nothing unless you're trained on two completely different fields?
IMO that should be legal, but only if they pay you your full wages for that period of time after you quit or are fired.
Let's see how eager they are to really protect those precious company secrets.
And by full wage, it's either the wage you had or the one you could get at the competitor. Otherwise, it's too easy to lock people in at non-competitive salaries.
Why not both? Full wages as damages + EU-style fine of maximum between some amount and some % of global turnover. Or fixed amount + % of global turnover.
No, that’s not enough to make it legal. I wouldn’t want to be out of work that long and potential employers would wonder how rusty I was
Yes, compensation needs to be a minimum requirement: isn’t that basic contract law? However contract law also requires that you be in a starting position to bargain or refuse and employees really aren’t: the imbalance of power is too great.
More importantly, things that block the functions of a free market like this really need to be weighed for societal good, fairness, and market efficiency. This fails all three. It also needs to be narrowly defined, because leaving it to legal action is the definition of failing market efficiency
Or sometimes, like mine, that you can't quit your contract early to apply for a full colleague position at the company you're being contracted out to.
I've had one in previous contracts. I smirked since they aren't applicable in my country unless they are willing to pay me to vacation.
ive signed one for every job I've ever worked, I think. UK and USA, employment and contractor. And then hopped competitors and to my knowledge no one even so much as raised an eyebrow.
the fact that non competes and NDAs are a thing upon leaving a company is fucking insane to me, seems like blackmail at best and straight illegal at worst.
But what do i know, i just like having rights.
the fact that non competes and NDAs are a thing upon leaving a company is fucking insane
Non-competes are completely evil. Especially so in fields requiring very specialized skillsets. And even more so when the company insisting on the non-compete lays off people.
How the fuck is someone supposed to keep a roof over their head in a situation like that?
learn a different skill dumbass L.
Or just be a C suite, and be able to coast for 10 years because you john roth'd your way to having millions of dollars.
Worker: "Well, I got laid off from the job I've been working for the last 20 years, but at least I have the skills I picked up along the way!"
Company: "Actually, those belong to us too."
companies: we need workers to specialize so that we can produce things of high quality.
also companies: What you specialized? Sounds like your problem dumbass.
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.
Only exception seems to be preexisting agreements for top execs making more than ~150k yearly and having decisionmaking power.
This is amazing! I’ve always had to be under a noncompete even though no one gives a shit about my work. So while no one would probably ever enforce it, I was always worried when switching jobs and now I don’t have to.
Fuck yes let's go! I am pumped.
*So what's the historical use of these? I can only assume in the past it was used sparingly, then went further and further until the current state of "fuck you employees".
I asked my dad about it. He said they've been around ever since he started taking salaried positions (which would mean roughly since the 70s~80s)
It's not whether or not they've been around, it's how they've been used, how often they've been used, for what positions they've been used, how severely they've been used. Etc.
Wow that's actually good. So who did this, where'd they put the original people, and how can we replicate the results with every other regulatory body?