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United States IT

Why America's FTC Proposed Banning 'Noncompete' Agreements for Workers (npr.org) 35

Posted by EditorDavid from the escape-clauses dept.
America's Federal Trade Commission "took an a bold move on Thursday aimed at shifting the balance of power from companies to workers," reports NPR: The agency proposed a new rule that would prohibit employers from imposing noncompete agreements on their workers, a practice it called exploitative and widespread, affecting some 30 million American workers. "The freedom to change jobs is core to economic liberty and to a competitive, thriving economy," said FTC Chair Lina M. Khan in a statement. "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."

Noncompete agreements restrict workers from quitting their jobs and taking new jobs at rival companies or starting up similar businesses of their own within a certain time period — typically between six months and two years. They're used across a broad array of industries, including in high-paying white-collar fields such as banking and tech, but also in many low-wage sectors as well, as President Biden has pointed out.

"These aren't just high-paid executives or scientists who hold secret formulas for Coca-Cola so Pepsi can't get their hands on it," Biden said in a speech about competition in 2021. "A recent study found one in five workers without a college education is subject to non-compete agreements...." The FTC estimates that a ban on noncompete agreements could increase wages by nearly $300 billion a year by allowing workers to pursue better opportunities.

The rule does not take effect immediately. The public has 60 days to offer comment on the proposed rule, after which a final rule could be published and then enforced some months after that.
Thanks to Slashdot reader couchslug for submitting the story.
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Why America's FTC Proposed Banning 'Noncompete' Agreements for Workers More

Why America's FTC Proposed Banning 'Noncompete' Agreements for Workers

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  • What? (Score:2, Insightful)

    by Anonymous Coward
    Again? [slashdot.org]

  • Hint of the Day (Score:2, Informative)

    by LeeLynx ( 6219816 )
    At the top of the page, there is a little box labeled "Search". If you type a few keywords from the article you are about to post there, then click the little magnifying glass, you can find out if the topic of the article was already reported on 2 days ago and commented on 150 times.

  • Film on the American eleven o'clock news.

  • Or maybe it should be a joke about paying for the paving on the road to you-know-where?

    My initial reaction to the story is that the FTC probably means well, and noncompete agreements are being abused and certainly should be limited in some ways, but... Good intentions are no match for cancerous and agile greed. The balance of motivations is all wrong. The FTC is like a lumbering golem, but the gold diggers work fast and then faster in their rush to find more gold, even when it's fool's gold. I'm inclined to

    • Re: (Score:2)

      by PPH ( 736903 )

      However the most obvious countermeasure for such a ban would be greatly extending the vesting periods of stock options...

      Stock options? Just ask for a paycheck every two weeks. Or walk out.

    • At the end of the day, companies are fictional entities and this idea of not competing against them was probably forged out of syphilis and lead poisoning.

    • Re:Good intentions just can't keep up (Score:4, Insightful)

      by rattaroaz ( 1491445 ) on Saturday January 07, 2023 @03:42PM (#63187830)
      Non compete clauses are inherently one sided, and limiting a one sided rule is not a reasonable solution. The employee would have to sue the company, and that situation is very one sided as well.

      However the most obvious countermeasure for such a ban would be greatly extending the vesting periods of stock options... )

      I fail to see the negative here. If you choose to leave, you have to leave with unvested stock options, and that is your choice. With a non compete clause, you cannot legally take a particular job, no matter how good it seems. It's illegal, and not a choice at all. Countermeasures only happen when you don't ban something, but rather, kinda, sorta, maybe change it in a limited but not sincere sort of way. You proposed example is not a countermeasure at all, but rather, a reasonable suggestion.

      • jimmy john's did this on low wage workers!

      • But vesting stock options are already a scam to keep you there and gamble about whether they will have to pay you. They also minimise things like payroll tax they the company pays.

        They're handed out like candy instead of pay rises and performance bonuses. Half the time you wear the tax liability on today's price at grant time (and consequently your real take home pay is lower as a result). The fake income is counted toward lots of things like tax concessions, government benefits, etc, which means your out o

      • A lot of the contracts I've done have non-complete clauses in them. I always just ignored them. No company wants to test the legality of them and get a bad reputation for trying to deprive a person of a job.

      • Re: (Score:2)

        by shanen ( 462549 )

        NAK

  • Good idea in principle (Score:4, Informative)

    by mkwan ( 2589113 ) on Saturday January 07, 2023 @05:29PM (#63188048)

    Note that non-compete clauses are already banned in California, North Dakota, Oklahoma, and Washington, D.C. Their economies seem to work fine.

    Banning them in other states would be good in principle, but probably won't make much difference.

    Realistically, non-competes aren't the main thing stopping people from changing jobs. Most people probably don't even know they exist, or the circumstances where they apply. And most employers simply don't care enough to threaten/prosecute - assuming they even know where the employee is going.

    • Ali act helped boxers. MMA could be next. Instead of non compete agreements could have non performance liquidated damages . Contracts for a period are relied on by both parties. At the end , or with cancellation clauses then different. Could affect severances as well.
    • Healthcare and medical insurance is the main thing keeping people from changing jobs.
      • Not wrong. We could start breaking that coupling too in any manner of ways. Healthcare never should've been tied to jobs in the first place.

    • Re: (Score:2)

      by Octorian ( 14086 )

      Note that non-compete clauses are already banned in California, North Dakota, Oklahoma, and Washington, D.C. Their economies seem to work fine.

      Some would even argue that the lack of non-compete agreements in California is a huge part of why Silicon Valley has been so successful.

  • What took so long. In California non-compete agreements between employers and employees are have been generally unenforceable for many years. The California Business and Professions Code section 16600 provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Silicon Valley essentially was created by former Fairchild Semiconductor employees who departed with their brains full of specialized knowledge -
  • Non-competes are allowed, but require reasonable compensation. For example, you could force me to work at McDonaldâ(TM)s instead of my current job, but youâ(TM)ll have to pay the difference in salary, plus future raises, plus compensation for smelling of food. Suddenly enforcing a non compete is not a good idea anymore.

    And it is entirely illegal in the eu to stop anyone from working in a different eu country.

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