In the instance this change doesn't go through it is important to be aware that non-competes don't survive hardship tests. There is an extreme burden on the employer to prove that there are appropriate jobs available to the former employee that wouldn't violate the non-compete or (and this is much more common for "serious" non-competes in the modern world) provide partial compensation to the employee for the term of the non-compete. Additionally, for the survivability requirements above non-competes need to be extremely specific you can't ask a software dev not to use a computer or even ask an aerospace engineer to find a job outside of a defense contractor (since that's an overwhelming proportion of the available jobs - a more appropriate restriction might be prohibiting them from working on a list of specific projects that are direct competitors with the project they were working on for you).
I wouldn't be sad to see the later form survive to be honest - there are a few situations where non-competes may be justified from a business perspective... but I think it's fair for companies to be on the hook for continued compensation at some proportion of the employee's former wage to actually exercise the privilege to deny the employee work in a specific field. But hey - better non-competes die than we allow the current chilling-effect bullshit of overly vague and broad non-competes that are never intended to see the inside of a courtroom.
> be on the hook for continued compensation at some proportion of the employee's former wage to actually exercise the privilege to deny the employee work in a specific field
Yes. The proportion should be 100%, plus all benefits (401k, health, continued vesting of equity, etc). If you're being denied future employment then the employer can pay for it if it's that important to them. Possibly even more than 100% if they're preventing me from going to a company with a substantial increase in pay.
Which is why I think companies should have to “buy you out” in the event you get another job. If you get an offer and they want to exercise the non-compete they have to pay you total comp for that offer otherwise you can work there.
I’m sure in a forum of devs you’ll will think of plenty obvious “hacks” which are just fraud and our courts are perfectly capable of sussing that out.
This seems unwieldy because people change jobs for reasons beyond their own immediate salary.
Maybe I want to make a lateral move because I'm unhappy with my boss or my commute. What if I'm moving because my partner found a new/better job elsewhere, or I want to be closer to my extended family?
You can try to put a monetary value on some of these (pay my commute?) but I don't think you could "buy me out" of moving for an ailing parent or sick kid.
Huh? Why doesn’t this work? If you want to change jobs for any reason you can and if the employer wants to exercise the non-compete they have to pay you your best offer to not work, not to keep working for them.
Ehh, this seems like a hard deal to really get right, to the extent that it is sort of “fair” to the employee, the company could just offer that deal if they wanted.
Which is to say, nothing prevents a company from offering that deal as an alternative, rather than attempting to force it through with a non-compete. But, the employee would have to consider the cost to them of basically pausing their career development and letting their skills atrophy. That’s a pretty big cost! It seems unfair to force that cost on them through the contract (especially if we agree with the premise that non-competes are usually entered on a sort of unwilling basis).
Nothing prevents the company from offering this sort of deal currently. But I’d expect something higher than the offer, to take it. Companies don’t seem to offer this sort of deal currently, I guess because it seems like a pretty bad deal on their side too. Paying somebody to do nothing seems pretty expensive, I think you only do that for political favors.
Ultimately that is still very anticompetitive, it just asks for more compensation to the worker but is still paying them to do nothing and hurting competition, a sure sign of a broken system (paying people to do nothing is usually a charged leveled at very broken bureaucracies).
For sure - I would like to see non-competes banned outright, of course.
I was just replying to OP for implying that a worker should get a reduced (i.e. proportional) payout for being denied employment at a competitor. The "losing" employer should pay substantially for such a egregious act and the employee should benefit.
> In the instance this change doesn't go through it is important to be aware that non-competes don't survive hardship tests.
This may be true in theory, but more often that not for the most vulnerable people it's not true in practice. The problem is that people have to be both aware that they can challenge a noncompete and willing to do so. That is, at a minimum, very time consuming, and if you're working a low-wage job, you probably aren't going to be practically able to fight a noncompete. If you get a new job and your old employer sends a threatening legal letter to your new employer, they're probably just going to fire you rather than help you fight it.
If the system put the burden on the employer to prove that a noncompete was valid before making any attempts to enforce it, the current system might work well. Unfortunately, the reality is that even totally unenforceable noncompetes are still effective most of the time - that's one reason you still see them put into contracts in places where they have no chance of surviving a legal challenge.
To add to this, I know a person who had a job offer rescinded because the company he was going to didn't like the potential of non-compete enforcement by the company he was leaving. It's fortunate that it can (sometimes) be challenged successfully but in many unfortunate instances that won't be an option. The best case from my perspective is that these contracts are simply voided.
Thats my understanding of non-competes. It is really for the company to win in a court case. Its a threat to scare people in complying because most people don't have the war chest to fight it out. For most people, you can fight it, but your gonna go bankrupt. So it is often better to just cave in. The company will just drag it out so it costs you the entire time. Its more of a competition of who has the bigger war chest and the employer is usually the one with it.
>current chilling-effect bullshit of overly vague and broad non-competes that are never intended to see the inside of a courtroom
I worked for a very small company for a number of years quite a while back. We basically wouldn't even look at someone who had a non-compete even if it "probably" wouldn't be an issue. The risk of having to fight some big tech company--who might also have been clients to some degree--was just too great.
I'm not an expert, but IIUC the financial industry tends to pay full "garden leave" for employees serving out their noncompete terms https://en.wikipedia.org/wiki/Garden_leave , presumably partly for this reason.
This is correct — very common practice in trading (I am currently sitting out one now!).
Generally they are 3-12 months in duration, although recently we are seeing much longer ones (24 months) from firms such as Citadel.
You generally draw full base salary, and healthcare comes from COBRA.
US-wide ban of non competes is good for hiring firms (they get the talent immediately), bad (allegedly) for firms from whom the talent is leaving, and mixed for the workers themselves (for whom the garden leave can be sometimes received as a paid sabbatical). It will be a really big change.
Long-term garden leave is still unequal as you forfeit things like bonus (which can be a significant percentage of TC) and you can't practice the skills of your employment for months or years. Imagine going on leave from the financial sector in 2007 and coming back in 24 months later, for example.
And you highlight how allowing non-competes with garden leave is a mixed bag. If someone's fine with taking a year or two off while getting some fraction of the total compensation they were getting previously, I suppose it can look like a good deal. But that would be pretty unsatisfactory for a lot of people mid-career with kids in college.
IIUC we're generally talking about full base salary in the case of financial-industry "garden leave", though obviously missing out on the possibility of bonus payments could really sting for many in that business. And obviously being "out of the game" for a significant amount of time can hurt, especially if you're in an area where things are changing quickly.
From the offers I was getting back in the day, finance runs on low base salary and huge bonuses. Bonuses of 200% of the base salary are not unheard of. Full base salary can still mean quite a bit of pain.
In the most recent contract I saw from a trading firm, they would only do this if they let you go, and not for cause.
So for sure no "garden leave" if you quit, and also not if they can find a reason to fire you. And of course no bonus, which is often a majority of total comp.
Possibly this sort of thing may vary by state. There might also be some room to negotiate depending on how much they want you.
I'm trying to think of why the powers that be want this too, and the only thing I can think of is to expand their hiring pool/make poaching legal. Maybe I'm too cynical.
Option 1: The labor pool is a free market. This means that companies are free to choose who to hire, and workers are free to choose who to work for. Non-compete agreements prevent the latter, and so the market becomes inefficient.
Option 2: The labor pool is a class struggle, in which employees exploit their workers. Non-compete agreements of a form of exploitation, tying a worker’s livelihood to a single employer.
Option 3: Employees belong to the company they work for. Non-compete agreements codify this natural relationship. Hiring a different company’s employee is a form of theft, and is called “poaching”.
Option 4: Any voluntary, informed contract is valid. Non-compete agreements are one such contract. Forbidding non-compete agreements is an unjust restriction.
Under options 1 or 2, non-compete agreements are clearly unethical. Option 3 requires accepting an unethical premise. Option 4 requires stretching the terms “voluntary” and “informed” to apply to Morton’s Fork.
I’d put the question another way: Given the negative effects of non-competes, why should they be allowed?
Yes, but another way to look at it is that the volume of successful strikes of the last few years are making the powers-that-be sweat a bit.
This feels like a sacrifice play to me. I'm sure that the cost of improving wages, hours, and benefits so as to retain staff is a lot less than improving all those things plus the overall cost to the business and/or economy of a strike.
Banning (most) non-competes is likely good policy, particularly agreements that do not provide for payment during the period of enforcement. But you also have to ask whether the FTC is the right part of government to make this decision.
The States have 50 different approaches written into their laws on how to deal with non-competes. Some ban them entirely, while others curtail their scope or shift the burden to employers to justify them, and many do not regulate non-competes at all. A rule by the FTC that preempts the laws of every state for all non-competes regardless of scope without any specific statutory authority is the wrong approach.
The FTC is justifying this under Section 5 of the FTC act, which in relevant part prohibits "unfair or deceptive acts or practices in or affecting commerce." This kind of wholesale preemption of state law regardless of context seems like an awfully big change for such a broad and vague statute. Underscoring this point, the FTC has not historically used Section 5 in this way.
Sure, anything that inconveniences people with money gets challenged in court.
I also think "they never did it before" is not a very good reason to not do it now. Especially as this is a growing problem. In 2018 research found, "noncompetes cover 18 percent of all U.S. workers and have covered 38 percent at some point in time."
Had the FTC banned them earlier, like in 1914 when the FTC Act was written, surely somebody at the time would have squawked that it was not a problem and how this was just another example of needless government regulation. If the right time to solve a problem is neither when it's small nor when it's grown large, it almost sounds like some people don't want the problem solved at all.
The problem is not that the FTC has been silent on non-competes in the past. The problem is that the FTC has never used Section 5 this way before in any context. Courts are skeptical of agencies "discovering" new powers based on vague sections of their enabling statutes.
Courts are increasingly skeptical of regulatory powers at all. Which, gosh golly, might have something to do with the increasing funding by the super-rich of groups that push for judges that think that way.
I think courts will be rightly skeptical of unelected agency commissioners preempting the laws of 50 states based on 9 words that the FTC has never before relied upon. I also think that this is obvious and should not be controversial.
Presumably those 9 words mean something though. The FTC clearly has the power to prohibit deceptive acts that effect commerce, this is spelled out in the law. If that power doesn't apply to making changes that interfere with state rights, then I would ask what does that power apply to? In practice, does it apply to anything at all?
(One conclusion I can imagine for this debate is that laws are not coherent, they are self contradictory in some cases, and this might be one of those cases.)
However this turns out, I'm glad more people are talking about this issue, because I think 95% of the people agree non-competes are unfair, which is enough that maybe things will change.
I'm sure you do. I think that is obvious that regulatory agencies were established to solve complex and dynamic problems, and so broad language should be interpreted, well, broadly. If Congress wants something else done in response to changing circumstances, they can always change the laws. I think that should not be controversial. But we live in an age of billionaire-driven propaganda about this topic, so controversial it will be.
Obviously the Federal government is constitutionally authorized to regulate non-competes. That's not my argument at all. And the FTC is not banning unenforceable non-competes, the proposed rule bans all non-competes.
Regardless of which non-competes they choose to ban, however, the fact remains that this is the first time that the FTC is attempting to use Section 5 in this manner. It is very unclear that they have the authority to issue the proposed rule. My opinion is that they do not, and I think the courts will agree with me.
Can you explain why they don't have that authority? Do you think Congress can't delegate its power through a statute? Or do you think that it hasn't done so in this speciifc (Section 5) instance?
The latter. Courts are skeptical of agencies "discovering" new powers decades later that are based on vague sections of their enabling statutes. Congress could of course directly ban non-competes or amend the FTC Act to give the agency this power.
This is hardly a new power, the FTC already regulates business contracts such as franchise agreements. This extends as far as Fortnight’s item shop.
It’s one thing for agencies to suddenly focus on some new area tangential to their mandate, but this seems to be exactly that they are supposed to be looking at.
> And the FTC is not banning unenforceable non-competes, the proposed rule bans all non-competes.
Conditional (the condition of every single one going to court) versus unconditional. I see no reason the power to ban would be limited to a specific interpretation, in this case.
What is the argument (not just reiterating the point of contention)?
"Under this Act, the Commission is empowered, among other things, to (a) prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; (c) prescribe trade regulation rules defining with specificity acts or practices that are unfair or deceptive, and establishing requirements designed to prevent such acts or practices; (d) conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce; and (e) make reports and legislative recommendations to Congress."
Seems to me like the FTC is exactly the group to make this decision
This would be a big blow to California. One of the reasons I didn’t move to Washington was that my employer was known to sue for breaking the non compete if you headed to a competitor. Being employed in California protected me from said lawsuit.
While I'm all for making non-competes for employees unenforceable in general, I think their role is overplayed notwithstanding your anecdote. Otherwise you'd have a tech industry in Oklahoma and wouldn't have one in Massachusetts, which until fairly recently fully allowed for non-competes. (EMC in particular fought against legislative change but there's now a somewhat weak garden leave requirement--but it at least makes companies put skin in the game.)
The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements. Also, the tech industry in California is an order of magnitude larger than that in Mass.
>The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements.
That's pretty much my point. The presence of non-competes did not prevent the development of a tech industry in MA. And, while VC funding is about 20% of CA's, MA+NY+CA have far more VC than any other states--and NY and MA together have more than half of CAs funding.
Those two states collectively also have a lot of different kinds of "tech" that are far less represented in CA such as fintech and biotech/pharma.
i think the point GP is making is that Mass's tech sector might be actively hindered because of non-competes, and that without the universities, who knows if it would exist at all.
Oh, I think it's obvious that, absent a concentration of world-class research universities, MA would not have developed the sort of concentration of technology-oriented companies that it's had over the years.
I'll just add that I'm not sure how common non-competes actually were in the MA computer industry. I certainly never saw one until the company I was with was acquired by EMC in about 2000. What is true is that people tended to stay with companies a long time but I don't have any evidence that non-competes played a big role in that.
As someone who was there at the time, the reasons were complicated. The Route 128 computer industry was in pretty significant decline and nothing had really come in to replace them. And the metro itself saw an outflow of population until the late nineties. When Teradyne moved out of Boston that was probably the last significant tech company in the city proper at the time. And the whole biotech and pharma boom in Kendall Square didn't happen until later. (As well as the establishment of major offices for firms HQd on the west coast.)
At the time of Web boom, I didn't understand some of the foot-dragging by West Coast tech companies, on setting up offices Cambridge/Boston, to get more of the talent fresh out of the universities, and the research university partnerships. But maybe they (correctly) thought that most of new grads would come to them.
In the case of Google, I thought there might also have been a Stanford-vs.-MIT factor. MIT was known as very strong-minded and self-assured. (And Stanford and California have their own stereotypes.) Were I trying to craft a particular culture, starting either around Stanford or MIT, there's no way I'd open a major office on the other coast until the HQ culture had really gelled, and I thought I could get the distant people to meet us more than halfway (rather than them carbon-copying what they already know from MIT or California).
Outside of trade secret level engineering, pharma and biotech, I've never seen a non-compete enforced because the employer was actually worried about real competitive advantage.
I have seen plenty where some Junior Vice President got angry at someone for quitting, and decided to sue to make that person's life hell. I've made several hires (sales, marketing, engineering, even executive) where the JRVP calls and tries to threaten my company with a lawsuit. My answer is, send over what it will cost to hypothetically settle, and we'll talk. Never once have I been given a number or sued. I assume this is because, A) they know the non-compete is unenforceable or B) the non-compete doesn't exist, or C) it's punitive with no real harm in the marketplace from the hire.
I've both seen non-competes for software development and been sued in the last 10 years. I was partnered with someone who had signed one when we founded a company, which I immediately withdrew from. No need to get involved in a project that has legal problems before a revenue stream.
I have. Tiny company had a coder go off to another company in another state that they were approximately in competition with. They sued. Don't know the outcome, but I know it when to court.
Here's how non-competes could work that would be perfectly fair to employees: When you get a new job offer, you tell your old employer about it. Your old employer then has two choices: either let you take the new job, or pay you a salary and other benefits equal to what the new job would have paid, for the duration of the noncompete, except without you having to do any work. Then companies would only require noncompetes when it's actually really important.
Okay, slight adjustment to fix that: the pay is the higher of the old job's pay (at its peak during your employment period there) or the new job's pay.
huh. at the peak i was making $1M a year. now i’m not worse but im getting much less because have you seen the stock market?
that’s the problem with government “regulations”: unintended consequences. and lack of personal responsibility: “ah, we didn’t think of that, well, sucks to be you”
When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years.
That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training. Something like that would've been in my favor.
Maybe a better solution would be something like the government will pay a company if an employee leaves within some time frame after getting hired (2 years or so) if that employee gets a higher paying job in a similar role. It'd be tricky to structure correctly, but the whole idea is that what the government is really paying for is job training insurance. It mitigates the risk for firms for hiring people, thus making hiring faster and keeping people out of unemployment.
> allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training
I favor training, loyalty, seeing a system through a lifecycle (rather than job-hopping before you see both cause and effect), etc., but...
Requiring an employee to stay at a company, especially in our current not-very-scrupulous business culture, sounds like a recipe for indentured servitude.
Read my last paragraph. I'm suggesting a way that would allow employees to leave whenever they want, but to derisk training for companies so that they still have an incentive to hire and train untested people.
That seems close to arguing for indentured servitude.
What companies probably can do in general (not an employment lawyer) is have a contract requiring the repayment of outside training if you leave on your own volition before some period of time--which seems reasonable.
What you want is literally just contract employment (not the same thing as being a "contractor"). It's common in the world of teaching (though these days it's generally just for the school year. In the past 3 year contracts were more normal). It's not very common in the world of business and instead employment is generally at-will (which is another reason why non-competes are BS. At-Will employment lets the company fire you whenever they want, but the non-compete makes it difficult for you to leave whenever you want).
> That seems to be an argument for keeping non-compete clauses
That was an argument that the labor buyers you were negotiating with were perceiving an excess supply of labor that they wanted relative to demand at that time.
Your solution would have been to try to sell to other labor buyers or change the type of labor you were selling to something that was in sufficient demand such that buyers would not have a choice other than to train you, and treat you well enough such that you are incentivized to stick around.
or, maybe if a company is scared of losing an employee, they should pay them market value.
holding a grudge over them because you trained them and are trying to recoup your costs is idiotic and doesn't work.
asking the government to subsidize corporate training is a non-starter. it is a corporation's job to both DEVELOP and RETAIN talent. Both. Companies would like very much to do neither--but putting in the effort is required for good results.
You say this like "this is the moral and right thing to do". If I could snap my fingers and make it happen, then I would. That's not how the world works though. Companies have a profit incentive. And that's a good thing. We want them to train employees in ways that will be productive and end up having them output something that is valuable. But that training can be expensive.
What happens if everyone concludes that they'd be better off waiting for a competitor to incur the cost of training someone, then hiring them away? We'd get into a situation where no one wants to train anyone.
Non-competes exist and that's already the situation. They're all over the place in basic retail, who I can assure you is not doing a lot of valuable training.
Everyone seems to be focusing on non-competes for the employee/employer relationship.
In my experience, I've only used them when acquiring a business. I always like that there is a 3-5 year non-compete so the previous owner doesn't just setup shop again immediately after selling their business to me.
Not through FTC rulemaking. Mandatory arbitration is permissible under the Federal Arbitration Act. You'd have to get Congress to pass a law banning them.
The one non-compete clause that I signed was very permissive. There was a short list of companies I could not sign with for a year. I felt it was pretty fair to be honest. Otherwise, I do not sign them.
I had a non-compete and a host of other completely unenforceable (I thought at least) stipulations in a previous employer. They even tried to put in some three-month notice period, which I thought was way over the top, but ended up working for two months after I gave my notice and left it at that. My view was, they have absolutely tiny chances of finding out where I was joining next, unless I go publishing it on LinkedIn. So I left it at that. And I'm sure my former employer wasn't going to go to the trouble of tracking me down, so that was my decision made.
Here's the thing I wonder about (especially in tech) - who's to say where you currently work except what you may reveal in LinkedIn or on social media?
I realize that there are many times when non-compete clauses are examples of big companies punching down at low-level workers, but I've also watched them work out well for the low-level workers too. At least two of my friends have been good enough to be poached by competitors who were willing to pay them to take a 4-8 month vacation until the non-compete ran out. They loved the long vacation.
All things being equal, a fluid marketplace with many options is best for all sides. Businesses that are too strict with their non-competes also risk driving away potential workers. In my experience, the businesses only ask for the non-competes when they're giving someone a significant amount of responsibility.
For non-classified contexts, they should be properly regulated. For example, there should be a term limit that is something reasonable, like 18 months, and there should be a provision that the duration of their enforcement is paired with ongoing compensation at the same terms as during employment. So if you made $200k cash plus $100k Stock options per year, on the moment your employment contract ends if they want to make you unhirable from their competitors it should cost them ongoing money.
For classified contexts, it should be a longer term for some fields based on national security concerns and ongoing renumeration should not be provided, given it is literally national security. This nonsense where British pilots were training non-allies on UK flight tactics right after leaving the RAF is bananas.
Non-competes have positively flourished in the tight labor market. I know a guy who works in PR who moved across the country to work for a company serving a completely different industry who dealt with aggressive emails from his former employer's legal team about enforcing the non-compete he signed.
I know a guy who was wrongfully persecuted for his non compete, it didn't even apply, but his former employers had friends in high places amd proceeded anyway. He lost his new job and it completely upended his families life.
The head of the FTC is known to be someone who wants to enact progressive policies. For her and her staff, limiting noncompetes is driven by idealism that workers should have more rights.
I believe that these changes are echoes of Bernie and other progressives getting lots of votes since 2016. They are now insiders in the government rather than outsiders, so they advocate for progressives to lead departments.
You know, this is the exact reason why the "left" v "right" thing is do damned obnoxious.
Good ideas are good regardless of political party.
Barring several wedge issues that parties exploit to maximize outrage reaction in order to gain power, most people are pretty closely aligned on stuff like this.
I feel like if you polled the US population on this, 80+ percent of folks would be in favor of eliminating non-competes, regardless of political affiliation.
I agree with you though, that this is one of those good policy items that's historically been a casualty of tribalism and "campaign finance" aka bribes.
It's not a binary, it's limited thinking to say that someone is "pro-labor" or "anti-labor". Even that choice of words, framing the narrative and the associated emotional response is deliberate - and misleading.
Each situation is different, for example, I think you'd be pretty hard-pressed to find a majority of "right" voters who believe that coal miner unions are a bad idea.
I think it'd be pretty easy to find a majority of them who believe that the NEA does more harm than good.
But it's a lot easier to just lump everyone together and demonize them, right? To find a few tragic examples of abuses to maximize outrage reaction, and make sure everyone is properly corralled into their tribes and casting the "correct" vote, so we can show those nasty out-groupers what's what.
In case you were curious, the distribution of political leaning in unions is a lot more complex than what you might think [1].
If someone asks me whether I believe in unions, depending on the day and how hungry I am I'd likely respond with something like "which union? which industry?", though I don't consider myself to be "right".
I am skeptical of laws that both protect and prevent unions, though. I think people should be free to assemble in whatever manner they choose, and to negotiate the same way.
I also understand that this gets really complicated when strikes or mass-firings threaten fundamental infrastructure and security. So, like most things - it's complicated.
A new congress that hasn’t received as many gifts from the powers that want to keep this. And probably the proportion of upper management of the FTC that has gotten such gifts is getting lower (or the gifts are getting weaker).
I was writing a long comment up top about this, but instead I'll reply here. Person with a background in public policy, especially around poverty alleviation efforts. I think that the removal of non-compete clauses has to due to with employees who you normally (at least I wouldn't think) of being subject to non-compete clauses... namely, service industry workers. Apparently 1 in 6 are subject to non-compete clauses: https://thecounter.org/biden-targeting-non-compete-agreement... This industry has been 'suffering from' high vacancy rates since the start of the pandemic because the industry has low wages, minimal-to-non-existent benefits, generally no paid sick days, advanced notice of your work schedule isn't provided (thus it becomes difficult or impossible to attend college or work a second or third job), etc.
For a group of workers who are generally less able to afford legal remedies to situations such as non-compete clauses I can see how non-compete clauses are especially damaging to this group of workers. (I'll show some hard data points on non-compete clauses by pay and by education level obtained in a few paragraphs.)
If I had to guess I would say that non-compete clauses are being removed now because there's a "worker shortage": 1M dead from covid and of that some percentage (50%?) of that in the workforce; restricted immigration - legal and otherwise - for the last 3+ years and before that a decline in immigration due to the polices of the former guy). Why the quotation marks around worker shortage? Basically, the service industry businesses want workers but hardly anyone wants to work in the service industry because the pay's bad, there are often no benefits, in many states you don't know your schedule until the day of (which makes planning for childcare, attending college, etc. damn near impossible), etc.
So if I had to guess this is the federal government's way of attempting to address the "labor shortage" in the service industry across the United States as well as allow people in white collar jobs to switch into new roles. I would bet that most folks who fall under the 'knowledge worker' class of employment know that their company's non-compete clause is pretty much non-enforceable, but ask your average restaurant worker who is under such a clause and I bet that they believe that the non-compete clause _is_ enforceable.
From this report from 2015, it looks like ~18% of all US workers are under a non-compete clause in their current role, with ~15% of workers without a college degree being under a non-compete clause and roughly the same percentage of workers with an annual wage of <$40,000 being subject to a non-compete clause (Rf. page 7 of 36): https://home.treasury.gov/system/files/226/Non_Compete_Contr... In that same document on page 16 you'll note that California, Oklahoma and North Dakota have the 'least enforcement' of such clauses. I suspect that the oil and gas industry in OK and ND enjoys not paying for training of employees, so if your employee can be trained at a competitor and then jump to your place of employment, full trained / ready to work, that seems to be what those states are looking for. (Yep, large swaths of ND and OK have over 20% of that county's employees employed in the petroleum extraction industries: https://www.ers.usda.gov/data-products/chart-gallery/gallery... )
TL;DR: Fifteen to twenty percent of all Americans are currently working under non-compete clauses (with 1 in 6 food service industry workers being subject to non-compete clauses). Thousands of jobs are going unfilled in the service industry as well as in white collar, 'knowledge worker' domains. By removing the ability of employers to create and enforce non-compete clauses this should, in theory, 'free up' around 20% of the workforce to change jobs. In theory, most of these workers would be changing jobs for factors such as more flexible work schedule (advanced notice in the case of service industry workers; WFH for white-collar workers), benefits and sick days, and increased wages. My (admittedly cynical?) take on this is that by freeing up 20% of the workforce to switch jobs the federal (and state) governments are hoping that they can get away with any increased spending toward social services and instead can just tell people 'Well, go look for and get a better [paying] job! What's stopping you? Certainly not a non-compete!" Also, by allowing a 'great migration' into new roles the federal government can get a rough tally as to how many immigrants they'll need to let in via the skilled (H1B, NAFTA, etc.) and unskilled (EB3) visa programs; it's my opinion from looking at state- and federal-level labor statistics over the past 3+ years that the data is rather 'noisy' and by removing non-compete agreements it should make it easier to get a "closer to reality" tally of how many workers the US will 'need' to import to create and maintain full employment in various skilled and unskilled industries.
I got an NDA from XXXXX (insert engineering firm name there) that basically is unenforceable unless they want to sue me for more than the $4,400 they paid me off when firing me.
Quite a tough lesson to learn that Arkansas hillbillies make shitty leaders.
The headline here is deceptive. Nothing in the article mentions any plans by "America's trustbusters to curtail the use of non-compete clauses". Rather, this is a short essay about non-competes, explaining why they are a bad idea. The article ends with a call-to-action:
> California, the global hq of disruptive innovation, goes a step further and bans non-competes altogether. The FTC should do the same, on the grounds that they are anticompetitive.
This is a "leader", which is the British name for an opinion piece. Its job is not to explain the news to you. As with most newspaper opinion pieces, it's a reaction to something in the news that you are expected to know about, or at least be able to look up.
As a subscriber, I think this is how it should be. There have been a zillion articles about this FTC action going back at least to June. Part of what I value about The Economist is its pithy, punchy writing and its assumption of a competent, numerically literate audience. Having to spoon-feed the basics in every leader would be tedious both for them and for its subscribers.
> The headline here is deceptive. Nothing in the article mentions any plans by "America's trustbusters to curtail the use of non-compete clauses".
Can't even read the whole article because of the paywall, but the part before the “pay for the full article” does mention the FTC has them in their sights.
U.S. moves to bar noncompete agreements in labor contracts - https://news.ycombinator.com/item?id=34260577 - Jan 2023 (494 comments)
FTC cracks down on companies that impose harmful noncompete restrictions - https://news.ycombinator.com/item?id=34254183 - Jan 2023 (176 comments)
Also related:
FTC intends to ban noncompete clauses that bind 30M US workers - https://news.ycombinator.com/item?id=34287441 - Jan 2023 (22 comments)
FTC Proposes Banning Noncompete Clauses for Workers - https://news.ycombinator.com/item?id=34260696 - Jan 2023 (9 comments)
Laws barring noncompete clauses spreading - https://news.ycombinator.com/item?id=33425934 - Nov 2022 (216 comments)