https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes

Likely not a valid rule. Expect this to be challenged in court and drag on for years.

Troy91 said:

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Likely not a valid rule. Expect this to be challenged in court and drag on for years.

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The courts will decide, until then, you are free to roam about the country.

Bingo

Quote:

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WASHINGTONThe Federal Trade Commission on Tuesday banned employers from using noncompete contracts to prevent most workers from joining rival firms, achieving a policy goal that is popular with labor but faces an imminent court challenge from business groups.

The measure, approved by the agency's Democratic majority on a 3-to-2 vote, marks the first time in more than 50 years that FTC officials have issued a regulation to mandate an economywide change in how companies compete. The commission has historically operated like a law enforcement agency, investigating and suing individual companies over practices or deals deemed to violate the law.

The FTC's final rule becomes effective in four months. The U.S. Chamber of Commerce plans to sue the FTC as soon as Wednesday over the rule. The suit would argue that the FTC lacks the legal authority to issue the rule and would ask a federal court to invalidate it, Chamber officials said this week.

"If they can issue regulations with respect to unfair methods of competition, then there's really no aspect of the U.S. economy they couldn't regulate," said Neil Bradley, head of strategic advocacy for the Chamber.

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https://www.wsj.com/politics/policy/ftc-bans-noncompete-clauses-that-restrict-job-switching-984d2187

ETA- thumbs down on this infringement on the right to contract

OldArmyCT said:

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I wonder what the effect on intellectual property will be.

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Way less than you think. Businesses will argue this, but isn't that the reason they filed patents in the first place, to get a limited monopoly? You can't have a monopoly on people, too. I have 60 patents. I wouldn't get to take them with me. The best defense of IP is to use it for something, not to hold the inventors hostage.

My daughter makes $17/hr as a part-time pharmacy technician. She has a non-compete. Ridiculous.

94chem said:

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My daughter makes $17/hr as a part-time pharmacy technician. She has a non-compete. Ridiculous.

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It's ridiculous practices like making all employees sign absurd non-competes why the FTC is doing this. It's a reaction to businesses bullying employees.

I've seen companies with absurd non-competes for entry level new grads. Things while still in the state, for two years you cannot perform work directly or indirectly by subcontract for any customer you worked while with the company. This is pretty insane and limiting to the employees if you work a few of the large customers in the region or sector. It severely limit's employees ability to job hop to other contractors or customers and when these clauses are industry wide in a specialized workforce it absolutely suppresses wages.

I think it's very bad for the labor market and innovation.

Imagine non-compete language in an athletes contract. It's absurd to think an average athlete would ever be restricted from joining another team once their contract is up. It's ridiculous that it's become common practice in many sectors and regions for average employees.

That's typical in my industry. It's two years of not soliciting any work from a client you worked on for the 2 years prior to leaving, and the same for the clients you even proposed on (without winning the work) within a year of leaving. That means all the people who have a lot of connections because they are able to manage lots of work well are screwed. They are kept around with a promise to be made a partner but can't actually take another job because their contacts are worthless for a couple years. The agreements also stipulate that even an entry level person just going somewhere else and working on the same client is assumed to be solicitation and subject to liquidated damages based on total fees charged by the entire company. If you worked on AT&T as a 2nd year and moved to a new firm who asked for your special knowledge about TV networks that somehow helped their AT&T account, you are now liable for 25% of the entire firm's AT&T bill, which is likely in the millions. All those agreements are signed again each year with the threat of not getting a bonus you already earned.

They also have nonsolicitation agreements for employees, which is a little more interesting. I understand not wanting to have people take their entire teams with them, but if you like your boss, he shouldn't be penalized for that. If this sticks, it's going to be a strange new world closer to the law firm model.

Ryan & Co used to sue or threaten to sue low level employees all the time when they left for greener pastures. The founder's brother was an attorney who would bankroll the suits and as I understand made a heap of money off it. They would (allegedly) harass the 22 and 23 year olds until they quit their new jobs or offered to pay the extortion fee. Makes sense that a firm that made its money from contingent fee state tax fees would also make money on threats like that.

It's telling that the chamber was this ready.

The chamber is an incredible lobbying partner for suppressing the cost of labor. Immigration, non compete law, just merciless against the American middle class.

OldArmyCT said:

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I wonder what the effect on intellectual property will be.

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The flip side of this is that California largely banned non-compete clauses with limited exceptions in the 1940s and some of the most people and IP centric industries set up shop and have flourished there for decades. Not suggesting we should follow California's lead on business regulations, but I do think the the potential impact to IP is overstated for most industries.

Pinochet said:

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That's typical in my industry. It's two years of not soliciting any work from a client you worked on for the 2 years prior to leaving, and the same for the clients you even proposed on (without winning the work) within a year of leaving. That means all the people who have a lot of connections because they are able to manage lots of work well are screwed. They are kept around with a promise to be made a partner but can't actually take another job because their contacts are worthless for a couple years. The agreements also stipulate that even an entry level person just going somewhere else and working on the same client is assumed to be solicitation and subject to liquidated damages based on total fees charged by the entire company. If you worked on AT&T as a 2nd year and moved to a new firm who asked for your special knowledge about TV networks that somehow helped their AT&T account, you are now liable for 25% of the entire firm's AT&T bill, which is likely in the millions. All those agreements are signed again each year with the threat of not getting a bonus you already earned.

They also have nonsolicitation agreements for employees, which is a little more interesting. I understand not wanting to have people take their entire teams with them, but if you like your boss, he shouldn't be penalized for that. If this sticks, it's going to be a strange new world closer to the law firm model.

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Your story has a possible path to partner. In my context there is no path to partner. There is just a handful of small suppliers and large OEMs. You do work in the sector out of school for a few years at one of these suppliers, then look around and realize you're non-compete covers the job opportunities you're most qualified for because you touched a few OEM customers. Now the smaller employers collectively have hundreds, even thousands of employees in this same spot because the non-compete. It absolutely suppresses wages when these employers basically have this understanding not to hire from each other, and OEMs fear hiring the occasional employee from the customer even for a totally different part of the company that didn't engage the supplier.

These employees aren't actually competition for these businesses. It's purely about limiting employees job opportunities to suppress wages. If employees could hop among the suppliers and the OEMs they do work for, they'd have to pay more to keep them employed at their company. A few underling employees with little to no customer interaction are not going to be taking business with them. That's laughable. It's purely about wages in many cases. It prevents employees from leaving to a larger OEM or another supplier who might be in a totally different non-competing business but happen to share a customer.

nu awlins ag said:

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Troy91 said:

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Likely not a valid rule. Expect this to be challenged in court and drag on for years.

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The courts will decide, until then, you are free to roam about the country.

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It will be at least 120 days before the rule goes into effect. Everyone I've talked to on this expects the courts to intervene and stop it before the effective date to allow the legal process to play out. IMO, this is a huge reach by the FTC that has been overreaching for a while now.

If employers just took care of their people, you wouldn't have to worry about this kind of stuff.