FTC bans noncompete agreements (1 Viewer)

[-fish-]

Wow. The FTC announced a rule banning non-compete agreements nationwide, and invalidating most existing non-compete agreements.

Link

There are some exceptions, like senior executives, and it is definitely going to face immediate challenges in courts, but what a major win for American workers.

 

[eoMMan]

I was so mad when BK said I couldn’t work at McDonald’s.

 

[-fish-]

Hope this isn't political. Seems more newsy that 30 million people just got released from noncompete agreements.

 

[-fish-]

I was so mad when BK said I couldn’t work at McDonald’s.

The world is your oyster. Five Guys, even Taco Bell!

 

[IvanKaramazov]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'm not well-versed enough on non-compete agreements to have an opinion.

 

[Zow]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I only know of them from the legal-aspect - which is mostly what I learned in law school and just listening to some of the transactional attorneys in my office (so don't take this as iron clad legal advice). My understanding is that most non-competes are required to be narrowly tailored both in terms of their scope and length and that public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

With the above in mind, I was surprised to read the claim that they somehow "keep wages low." I'm not saying that's untrue, instead I just genuinely don't understand the economics behind that. Can somebody smarter than me explain?

 

[bigbottom]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I’m glad I made a career change a while back. Would have lost about 50% of my work.

 

[-fish-]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

It's not all that nuanced of an issue. Businesses claim that they have invested in training workers, so they should be able to lock them up for a period of years or keep them from working for competitors for a period of years. Workers are unable to shop their skills to the highest bidder or move from a toxic environment. But when it comes to layoffs or firing, the businesses have no obligations to the workers.

There can still be protections for things like soliciting clients and disclosing proprietary information, but businesses can't hold their employees hostage anymore. This will allow workers to seek competitive wages and better opportunities. The whole concept has been anti-competitive from the beginning, and many states have rejected them already.

 

[-fish-]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I only know of them from the legal-aspect - which is mostly what I learned in law school and just listening to some of the transactional attorneys in my office (so don't take this as iron clad legal advice). My understanding is that most non-competes are required to be narrowly tailored both in terms of their scope and length and that public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

With the above in mind, I was surprised to read the claim that they somehow "keep wages low." I'm not saying that's untrue, instead I just genuinely don't understand the economics behind that. Can somebody smarter than me explain?

If I can't seek employment at a competitor in the same industry, you can pay me less than I'm worth in the marketplace since you've narrowed my ability to make any sort of lateral or upward move outside of your company.

 

[gianmarco]

Wow. The FTC announced a rule banning non-compete agreements nationwide, and invalidating most existing non-compete agreements.

Link

There are some exceptions, like senior executives, and it is definitely going to face immediate challenges in courts, but what a major win for American workers.

This is huge.

 

[IvanKaramazov]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

It's not all that nuanced of an issue. Businesses claim that they have invested in training workers, so they should be able to lock them up for a period of years or keep them from working for competitors for a period of years. Workers are unable to shop their skills to the highest bidder or move from a toxic environment. But when it comes to layoffs or firing, the businesses have no obligations to the workers.

There can still be protections for things like soliciting clients and disclosing proprietary information, but businesses can't hold their employees hostage anymore. This will allow workers to seek competitive wages and better opportunities. The whole concept has been anti-competitive from the beginning, and many states have rejected them already.

That was basically my understanding. I just don't know enough to suss out the validity of any of those claims. It's an interesting topic though, for sure.

 

[-fish-]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I only know of them from the legal-aspect - which is mostly what I learned in law school and just listening to some of the transactional attorneys in my office (so don't take this as iron clad legal advice). My understanding is that most non-competes are required to be narrowly tailored both in terms of their scope and length and that public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

With the above in mind, I was surprised to read the claim that they somehow "keep wages low." I'm not saying that's untrue, instead I just genuinely don't understand the economics behind that. Can somebody smarter than me explain?

They affect a ton of industries. Two of my best friends are in security and insurance, for example. Both have non-competes that have kept them from moving to other companies where they could make more money.

 

[bigbottom]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I only know of them from the legal-aspect - which is mostly what I learned in law school and just listening to some of the transactional attorneys in my office (so don't take this as iron clad legal advice). My understanding is that most non-competes are required to be narrowly tailored both in terms of their scope and length and that public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

With the above in mind, I was surprised to read the claim that they somehow "keep wages low." I'm not saying that's untrue, instead I just genuinely don't understand the economics behind that. Can somebody smarter than me explain?

They were a huge deal in a whole lot of industries and jurisdictions. And the argument on keeping wages low is that they impacted employment mobility. Now, if you want to keep a key employee from leaving for a competitor, you have to pay them to stay rather than rely on enforcing a contractual obligation. But there are unintended consequences as well in that companies will be more hesitant to invest in training employees and giving them access to key proprietary information if they can just leave and go to your competitor across the street. This could negatively impact employee development.

 

[El Floppo]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I’m glad I made a career change a while back. Would have lost about 50% of my work.

Inter doesn't want you anyways.

 

[Zow]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I only know of them from the legal-aspect - which is mostly what I learned in law school and just listening to some of the transactional attorneys in my office (so don't take this as iron clad legal advice). My understanding is that most non-competes are required to be narrowly tailored both in terms of their scope and length and that public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

With the above in mind, I was surprised to read the claim that they somehow "keep wages low." I'm not saying that's untrue, instead I just genuinely don't understand the economics behind that. Can somebody smarter than me explain?

If I can't seek employment at a competitor in the same industry, you can pay me less than I'm worth in the marketplace since you've narrowed my ability to make any sort of lateral or upward move outside of your company.

Yeah that makes sense. Still unsure how they are able to put a percentage on it but that's why I'm not an actuary.

 

[Osaurus]

I worked somewhere that wanted me to sign one. I laughed and laughed and laughed. Then I refused to sign it.

 

[CletiusMaximus]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'm not well-versed enough on non-compete agreements to have an opinion.

The proposed rule was published over a year ago and the FTC received tens of thousands of comments. My impression is this rule as released goes a bit further than many expected. There is a difficult balancing act between encouraging free movement of labor as contrasted with legitimate employer interests in protecting proprietary, valuable aspects of their business. Existing trade secret laws cover some of this but has gaps. As to existing agreements, the rule defines "senior executive" as being employees who earn more than $151,164 annually who are in a “policy-making position" - so that will be fun to argue about.

 

[bigbottom]

FYI - under the new rule, if you are a senior executive currently covered by a non-compete, you are still bound by it.

Edit: Cletius beat me to it.

 

[Gally]

I worked somewhere that wanted me to sign one. I laughed and laughed and laughed. Then I refused to sign it.

So was that Jim's Large Young Male's Restaurant and you decided to just go to Bob's Big Boy instead?

 

[Snoopy]

Is it true that sandwich makers at Jimmy John's had to abide by it?

 

[massraider]

Sweeeeeet!

 

[Scoresman]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I only know of them from the legal-aspect - which is mostly what I learned in law school and just listening to some of the transactional attorneys in my office (so don't take this as iron clad legal advice). My understanding is that most non-competes are required to be narrowly tailored both in terms of their scope and length and that public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

With the above in mind, I was surprised to read the claim that they somehow "keep wages low." I'm not saying that's untrue, instead I just genuinely don't understand the economics behind that. Can somebody smarter than me explain?

They were a huge deal in a whole lot of industries and jurisdictions. And the argument on keeping wages low is that they impacted employment mobility. Now, if you want to keep a key employee from leaving for a competitor, you have to pay them to stay rather than rely on enforcing a contractual obligation. But there are unintended consequences as well in that companies will be more hesitant to invest in training employees and giving them access to key proprietary information if they can just leave and go to your competitor across the street. This could negatively impact employee development.

If companies are going to invest less in training, than that is only going to hurt the company. Take care of your employees and they won't jump ship.

But you're right. That is exactly what companies will do. Anything to give workers as little as possible. So far I'm glad for this ruling.

 

[CletiusMaximus]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I only know of them from the legal-aspect - which is mostly what I learned in law school and just listening to some of the transactional attorneys in my office (so don't take this as iron clad legal advice). My understanding is that most non-competes are required to be narrowly tailored both in terms of their scope and length and that public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

With the above in mind, I was surprised to read the claim that they somehow "keep wages low." I'm not saying that's untrue, instead I just genuinely don't understand the economics behind that. Can somebody smarter than me explain?

They were a huge deal in a whole lot of industries and jurisdictions. And the argument on keeping wages low is that they impacted employment mobility. Now, if you want to keep a key employee from leaving for a competitor, you have to pay them to stay rather than rely on enforcing a contractual obligation. But there are unintended consequences as well in that companies will be more hesitant to invest in training employees and giving them access to key proprietary information if they can just leave and go to your competitor across the street. This could negatively impact employee development.

If companies are going to invest less in training, than that is only going to hurt the company. Take care of your employees and they won't jump ship.

But you're right. That is exactly what companies will do. Anything to give workers as little as possible. So far I'm glad for this ruling.

It cuts both ways though. There are situations where a company brought on a new guy, only to have him leave less than a year later to start his own company, having acquired all the know-how and vendor/customer relationships necessary to re-create the same business for himself. This is hard to accept when the owner has put decades of sweat and lean years into developing his process and relationships, etc.

 

[parasaurolophus]

Wow. The FTC announced a rule banning non-compete agreements nationwide, and invalidating most existing non-compete agreements.

Link

There are some exceptions, like senior executives, and it is definitely going to face immediate challenges in courts, but what a major win for American workers.

Thank you for this info. I have been counting the days until my two years were up. Going to be sending out some emails this evening.

 

[Scoresman]

I saw this earlier, and I wish I had been paying attention to the issue. I know this is a huge deal, but I'll not well-versed enough on non-compete agreements to have an opinion.

I only know of them from the legal-aspect - which is mostly what I learned in law school and just listening to some of the transactional attorneys in my office (so don't take this as iron clad legal advice). My understanding is that most non-competes are required to be narrowly tailored both in terms of their scope and length and that public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

With the above in mind, I was surprised to read the claim that they somehow "keep wages low." I'm not saying that's untrue, instead I just genuinely don't understand the economics behind that. Can somebody smarter than me explain?

They were a huge deal in a whole lot of industries and jurisdictions. And the argument on keeping wages low is that they impacted employment mobility. Now, if you want to keep a key employee from leaving for a competitor, you have to pay them to stay rather than rely on enforcing a contractual obligation. But there are unintended consequences as well in that companies will be more hesitant to invest in training employees and giving them access to key proprietary information if they can just leave and go to your competitor across the street. This could negatively impact employee development.

If companies are going to invest less in training, than that is only going to hurt the company. Take care of your employees and they won't jump ship.

But you're right. That is exactly what companies will do. Anything to give workers as little as possible. So far I'm glad for this ruling.

It cuts both ways though. There are situations where a company brought on a new guy, only to have him leave less than a year later to start his own company, having acquired all the know-how and vendor/customer relationships necessary to re-create the same business for himself. This is hard to accept when the owner has put decades of sweat and lean years into developing his process and relationships, etc.

I see how this could hurt a smaller business owner, but for the majority of corporations out there, this is me playing the world's smallest violin.

 

[Captain Cranks]

It cuts both ways though. There are situations where a company brought on a new guy, only to have him leave less than a year later to start his own company, having acquired all the know-how and vendor/customer relationships necessary to re-create the same business for himself. This is hard to accept when the owner has put decades of sweat and lean years into developing his process and relationships, etc.

Precisely what happens in my industry. I wouldn't hire anyone unwilling to sign one. They have access to key intellectual property as soon as they're brought in. Something must be in place to prevent them from learning my business and then replicating the next day.

 

[bigbottom]

Wow. The FTC announced a rule banning non-compete agreements nationwide, and invalidating most existing non-compete agreements.

Link

There are some exceptions, like senior executives, and it is definitely going to face immediate challenges in courts, but what a major win for American workers.

Thank you for this info. I have been counting the days until my two years were up. Going to be sending out some emails this evening.

A lawsuit seeking to enjoin the rule has already been filed.

 

[BrutalPenguin]

How do unelected bureaucrats get to make a seemingly sweeping decision like this? Why wouldn't this be legislation?

 

[Phil Elliott]

Will be interesting how confidential info/trade secrets/customer lists/pricing/etc is treated.

 

[Phil Elliott]

How do unelected bureaucrats get to make a seemingly sweeping decision like this? Why wouldn't this be legislation?

I think that will also be challenged in courts.

 

[Scoresman]

It cuts both ways though. There are situations where a company brought on a new guy, only to have him leave less than a year later to start his own company, having acquired all the know-how and vendor/customer relationships necessary to re-create the same business for himself. This is hard to accept when the owner has put decades of sweat and lean years into developing his process and relationships, etc.

Precisely what happens in my industry. I wouldn't hire anyone unwilling to sign one. They have access to key intellectual property as soon as they're brought in. Something must be in place to prevent them from learning my business and then replicating the next day.

Isnt there some sort of middle ground where employees arent locked into ridiculous contracts saying they wont jump ship, but at the same protecting the intellectual property of the business is someone steals and replicates it?

 

[Pip's Invitation]

It cuts both ways though. There are situations where a company brought on a new guy, only to have him leave less than a year later to start his own company, having acquired all the know-how and vendor/customer relationships necessary to re-create the same business for himself. This is hard to accept when the owner has put decades of sweat and lean years into developing his process and relationships, etc.

Precisely what happens in my industry. I wouldn't hire anyone unwilling to sign one. They have access to key intellectual property as soon as they're brought in. Something must be in place to prevent them from learning my business and then replicating the next day.

Isnt there some sort of middle ground where employees arent locked into ridiculous contracts saying they wont jump ship, but at the same protecting the intellectual property of the business is someone steals and replicates it?

The FTC announcement that fish linked addresses this:

Trade secret laws and non-disclosure agreements (NDAs) both provide employers with well-established means to protect proprietary and other sensitive information. Researchers estimate that over 95% of workers with a noncompete already have an NDA.

The Commission also finds that instead of using noncompetes to lock in workers, employers that wish to retain employees can compete on the merits for the worker’s labor services by improving wages and working conditions.

 

[Joe Bryant]

It was always my understanding many of these were flimsy at best and difficult to actually enforce.

 

[bigbottom]

It was always my understanding many of these were flimsy at best and difficult to actually enforce.

Depends on the jurisdiction. I enforced them quite frequently. I also busted them quite frequently.

 

[BassNBrew]

How do unelected bureaucrats get to make a seemingly sweeping decision like this? Why wouldn't this be legislation?

Have you noticed who are legislators are lately?

 

[massraider]

Employee retention will become a much bigger part of a corporation's plan to succeed, and that is good news for most Americans, whether they are subject to one or not.

 

[The Z Machine]

Good for most workers. I've been hamstrung by them in the past and not made a move to a higher paying position because of one here in Maryland.

 

[krista4]

Wow. The FTC announced a rule banning non-compete agreements nationwide, and invalidating most existing non-compete agreements.

Link

There are some exceptions, like senior executives, and it is definitely going to face immediate challenges in courts, but what a major win for American workers.

Thank you for this info. I have been counting the days until my two years were up. Going to be sending out some emails this evening.

The reg doesn't take affect for 120 days, and it's already being challenged.

 

[krista4]

I don't want to say too much since some people know where I work, but this has been something I've been on a task force for at work for a year. It was wholly expected that the FTC was going to end up exactly where they proposed over a year ago, despite all the comments. Surprisingly they actually expanded the exemption relating to individuals who have sold a business to the company putting the non-compete in place, which was a minor win for employers such as mine.

 

[krista4]

public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

I know you've already been corrected on this, but I'm sorry to tell you that non-competes exist for lawyers. And in the vast majority of industries.

 

[parasaurolophus]

Wow. The FTC announced a rule banning non-compete agreements nationwide, and invalidating most existing non-compete agreements.

Link

There are some exceptions, like senior executives, and it is definitely going to face immediate challenges in courts, but what a major win for American workers.

Thank you for this info. I have been counting the days until my two years were up. Going to be sending out some emails this evening.

The reg doesn't take affect for 120 days, and it's already being challenged.

Party pooper.

 

[thecatch]

Wow. The FTC announced a rule banning non-compete agreements nationwide, and invalidating most existing non-compete agreements.

Link

There are some exceptions, like senior executives, and it is definitely going to face immediate challenges in courts, but what a major win for American workers.

Thank you for this info. I have been counting the days until my two years were up. Going to be sending out some emails this evening.

The reg doesn't take affect for 120 days, and it's already being challenged.

I don’t know anything about FTC’s statutory authority for issuing such a rule but I do know Lina Khan has a habit of losing court cases.

 

[the moops]

public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

I know you've already been corrected on this, but I'm sorry to tell you that non-competes exist for lawyers. And in the vast majority of industries.

He just wanted type the words "lawyers" and "serve public good" in the same sentence

 

[Zow]

public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

I know you've already been corrected on this, but I'm sorry to tell you that non-competes exist for lawyers. And in the vast majority of industries.

Oh, I know, I signed one before. The other party and I then joked about whether it was enforceable.

This thread is definitely enlightening though as to how non-competes are more prevalent apparently than I ever thought.

For those who assume all lawyers know most things about all laws, let this thread be an example as to how that isn’t true.

 

[-fish-]

It cuts both ways though. There are situations where a company brought on a new guy, only to have him leave less than a year later to start his own company, having acquired all the know-how and vendor/customer relationships necessary to re-create the same business for himself. This is hard to accept when the owner has put decades of sweat and lean years into developing his process and relationships, etc.

Precisely what happens in my industry. I wouldn't hire anyone unwilling to sign one. They have access to key intellectual property as soon as they're brought in. Something must be in place to prevent them from learning my business and then replicating the next day.

Isnt there some sort of middle ground where employees arent locked into ridiculous contracts saying they wont jump ship, but at the same protecting the intellectual property of the business is someone steals and replicates it?

there are, and prohibitions against using propiertary information aren't affected by this ruling

 

[-fish-]

public policy doesn't allow them for certain professions that serve a public good (e.g. doctors, lawyers, teachers, first responders, etc.). So, my understanding is that they weren't that big of a deal and only impacted a few nuanced industries.

I know you've already been corrected on this, but I'm sorry to tell you that non-competes exist for lawyers. And in the vast majority of industries.

Oh, I know, I signed one before. The other party and I then joked about whether it was enforceable.

This thread is definitely enlightening though as to how non-competes are more prevalent apparently than I ever thought.

For those who assume all lawyers know most things about all laws, let this thread be an example as to how that isn’t true.

we knew, buddy. we knew.

 

[rockaction]

Whoa. Reading about this in Forbes and they mention a distinct name I recognize. I do a double-take. I think I know this guy. He has the exact same name as an old college acquaintance/friend of mine. We were in the same fraternity and both majored in economics. My old ex-girlfriend and I used to hang out with him at times. She was fond of him. Cool guy.

So I look the name up and sure enough I see a picture and his qualifications and job—it's him.

That's wild. Haven't spoken with him since a year or so after he graduated (we were a year apart). It's probably been over twenty-five years. Holy smoke.

Substantively, I don't know if he's totally for the outright federal ban on non-competes. I'm pretty sure that he thought—as late as 2015—that they needed more data to determine whether it would stifle incentives to invest in employees, as Captain Cranks pointed out upthread. And I think he maintains that the inference that the FTC made—which is that states in the U.S. that have banned non-competes have higher wages than states that haven't banned non-competes is not a causal relationship, as one other source points out.

But how cool is that? You never know when you'll see someone you once knew in the spotlight. Good for him.

This is like catnip to a former policy follower like I once was. Bravo, mang!

 

[fatness]

They were a huge deal in a whole lot of industries and jurisdictions. And the argument on keeping wages low is that they impacted employment mobility. Now, if you want to keep a key employee from leaving for a competitor, you have to pay them to stay rather than rely on enforcing a contractual obligation. But there are unintended consequences as well in that companies will be more hesitant to invest in training employees and giving them access to key proprietary information if they can just leave and go to your competitor across the street. This could negatively impact employee development.

I'm going to disagree a bit here. Companies that are smart enough to attract employees they want and smart enough to go through all the internal steps to craft non-compete agreements aren't going to suddenly become stupid and helplessly lose employees to other companies. They'll figure out quite quickly how to train and retain employees within the bounds of what's now allowed. Companies don't train employees as a gift to employees. They do it to benefit their own company.

 

[Mrs. Rannous]

How do unelected bureaucrats get to make a seemingly sweeping decision like this? Why wouldn't this be legislation?

Even if Congress was working perfectly, there just wouldn't be enough time/bandwidth to pass every necessary regulation. That's why Congress sets up various agencies to do the grunt work. It's called delegation.

 

[Joe Bryant]

The other party and I then joked about whether it was enforceable.

Same. And obviously, they can be enforceable. Lots of attorneys get lots of work on both sides of that.

I never have asked anyone to sign one as they've always seemed lame to me. I'd much rather create a place where people want to be than use pressure from the other side limiting where they can go.