The FTC, appointed by Biden, ban all noncompete clauses for all workers, update (08/20): judge issues "permanent injunction" blocking the rule

[SaysWho?]

Oh my fuck

 

Fact Sheet on FTC’s Proposed Final Noncompete Rule

WWW.FTC.GOV

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The following outline provides a high-level overview of the FTC’s proposed final rule:

 

[MarSolo]

WWE: “Dammit!”

[Commissar SFLUFAN]

Just now, MarSolo said:

WWE: “Dammit!”

 

Someone on ResetERA pointed out that this is gonna hit the WWE hard - as well it should!

 

However, there's little doubt in my mind that this will eventually end up in front of SCOTUS as a "major questions doctrine" case.

[Biggie]

I have no idea what this even means. Someone please explain it in Biggie terms. (serious not joking)

[Chris-]

Great, now do non-solicitation clauses next!

[Spork3245]

 

7 minutes ago, MarSolo said:

WWE: “Dammit!”

 

2 minutes ago, Commissar SFLUFAN said:

 

Someone on ResetERA pointed out that this is gonna hit the WWE hard - as well it should!

 

However, there's little doubt in my mind that this will eventually end up in front of SCOTUS as a "major questions doctrine" case.

 

Every WWE wrestler is suddenly a "senior executive" 

[SaysWho?]

5 minutes ago, Biggie said:

I have no idea what this even means. Someone please explain it in Biggie terms. (serious not joking)

Businesses in many industries put in something called a noncompete clause in contracts. That means even after you have stopped working for somebody, you are banned from working at a competing business in the area, and your old employer defines what the area is, for 6 to 12 months. What this does is makes them null and void, so you don’t have to wait half a year or a year to work somewhere else.
 

Conservative groups will be fighting against the change.

[SaysWho?]

This is used all the time in the news industry, and even for stuff as simple as sandwich shops if I remember correctly. You are finished working for them and yet they still have control over you.

[Jason]

4 minutes ago, Chris- said:

Great, now do non-solicitation clauses next!

 

Ooh this would have been handy when I was tutoring, one of the sites I looked at wanted a cut of every single tutoring session I got through them. Could have used them to find clients and then moved the clients off-app after the first session.

[Commissar SFLUFAN]

7 minutes ago, Biggie said:

I have no idea what this even means. Someone please explain it in Biggie terms. (serious not joking)

 

Quote

What Is a Non-Compete Agreement?

 

A non-compete agreement is a legal agreement or clause in a contract specifying that an employee must not enter into competition with an employer after the employment period is over. These agreements also prohibit the employee from revealing proprietary information or secrets to any other parties during or after employment.

Many contracts specify a certain length of time when the employee is barred from working for a competitor after they end employment. Employers may require employees to sign non-compete agreements to keep their place in the market. Those required to sign these agreements may include employees, contractors, and consultants.

 

What this does is prohibit these sort of agreements that essentially act as a "restraint on trade" for former employees.  "Competition" with a former employer doesn't even necessarily have to mean opening your own business - it can be as simple as being a hired as the employee of a competitor to a former employer.

 

Now, this doesn't ban "non disclosure agreements" (NDAs) which prohibit former employees from disclosing trade or proprietary secrets to their new employers.  As far as I'm concerned, NDAs are totally fine whereas "non compete agreements" are total bullshit.

[Spork3245]

1 minute ago, SaysWho? said:

and even for stuff as simple as sandwich shops if I remember correctly.

 

Subway allegedly does or used to do a non-compete.

[Biggie]

5 minutes ago, SaysWho? said:

Businesses in many industries put in something called a noncompete clause in contracts. That means even after you have stopped working for somebody, you are banned from working at a competing business in the area, and your old employer defines what the area is, for 6 to 12 months. What this does is makes them null and void, so you don’t have to wait half a year or a year to work somewhere else.
 

Conservative groups will be fighting against the change.

 

2 minutes ago, Commissar SFLUFAN said:

 

 

What this does is prohibit these sort of agreements that essentially act as a "restraint on trade" for former employees.  "Competition" with a former employer doesn't even necessarily have to mean opening your own business - it can be as simple as being a hired as the employee of a competitor to a former employer.

 

Now, this doesn't ban "non disclosure agreements" (NDAs) which prohibit former employees from disclosing trade or proprietary secrets to their new employers.  As far as I'm concerned, NDAs are totally fine whereas "non compete agreements" are total bullshit.

Ok but why would anybody with any sense think this is a bad idea? You should be able to work for anyone you want when you want. 

[Commissar SFLUFAN]

To give you an example, my cousin is an OB/GYN in South Florida and she's part of a practice.  The practice was considering selling itself to a larger medical group.

 

One of the provisions of the sale was that if any of the doctors from the practice decided that they didn't want to become part of the larger medical group, that doctor would be prohibited from setting up another OB/GYN practice or working for another medical group for 18 months within the entire state of Florida.

[Jason]

The I-was-born-yesterday charitable interpretation of noncompetes is that it's to prevent you from taking trade secrets to a competitor. But that's already illegal, you don't need noncompetes to enforce that.

[Commissar SFLUFAN]

15 minutes ago, Biggie said:

 

Ok but why would anybody with any sense think this is a bad idea? You should be able to work for anyone you want when you want. 

 

It's a "bad idea" if you're looking to reduce your potential competition from former employees setting up competing businesses or going to work for rival competitors. 

 

More charitably, if a company invests a lot of resources in training its employees, I can see the argument that a non-compete clause is necessary to ensure that their investment doesn't suddenly pick up and walk out the door to a rival the day after training ends.  Is that enough justification for their existence as a constraint on an employee's ability to fully participate in the market?  I'd say it that it's not at all, but I'm not completely unsympathetic to that justification, as flimsy as it may be.

 

The US Chamber of Commerce has already promised to sue the FTC for this rule claiming that it's unconstitutional for the FTC to promulgate the rule absent an actual law from Congress or that it's something best left to the states rather than at the federal level.

[Spork3245]

Does this also eliminate "exclusivity agreements"? Lawyers I've spoken with in the past have lumped them in with "non-competes"

[Commissar SFLUFAN]

3 minutes ago, Jason said:

The I-was-born-yesterday charitable interpretation of noncompetes is that it's to prevent you from taking trade secrets to a competitor. But that's already illegal, you don't need noncompetes to enforce that.

 

Right - that's exactly why I have no real issue with legally-enforceable NDAs.

[Commissar SFLUFAN]

12 minutes ago, Spork3245 said:

Does this also eliminate "exclusivity agreements"? Lawyers I've spoken with in the past have lumped them in with "non-competes"

 

Substantively, exclusivity agreements do appear to be the same as non-competes, but the FTC rule doesn't specifically address them.

[Commissar SFLUFAN]

41 minutes ago, Chris- said:

Great, now do non-solicitation clauses next!

 

"Build your own goddamned client/customer list.  Asshole." 

 

Oh boy - now that one is a tougher sell, even for me 

 

Non-competes are relatively low-hanging fruit compared to that!

[Chris-]

13 minutes ago, Commissar SFLUFAN said:

"Build your own goddamned client/customer list.  Asshole." 

 

Oh boy - now that one is a tougher sell, even for me 

 

Non-competes are relatively low-hanging fruit compared to that!

 

Most non-solicitations cover employees too though, which is my real issue. Protecting client/customer portfolios is fine.

[Commissar SFLUFAN]

2 minutes ago, Chris- said:

 

Most non-solicitations cover employees too though, which is my real issue. Protecting client/customer portfolios is fine.

 

Oh right - I totally forgot about employee non-solicitations!

[Spork3245]

47 minutes ago, Commissar SFLUFAN said:

 

Substantively, exclusivity agreements do appear to be the same as non-competes, but the FTC rule doesn't specifically address them.

I think exclusivity agreements are fine, which is why I find it odd they get lumped with non-competes. For a business (especially a small business) it allows them to enter into an agreement with a larger or important party and not have to worry about that party/business also working with a competitor. However, once that agreement has ended, there certainly shouldn’t be any amount of time where one or both parties can’t move on to business elsewhere. 

 

[Commissar SFLUFAN]

1 minute ago, Spork3245 said:

I think exclusivity agreements are fine, which is why I find it odd they get lumped with non-competes. For a business (especially a small business) it allows them to enter into an agreement with a larger or important party and not have to worry about that party/business also working with a competitor. However, once that agreement has ended, there certainly shouldn’t be any amount of time where one or both parties can’t move on to business elsewhere. 

 

OK - that's not quite what I had in mind for the exclusivity agreements so it's a misinterpretation on my part.

 

Yeah - I see no issue with a vendor/customer exclusivity agreement of the type you described as long as it doesn't run afoul of the various aspects of anti-trust.

[Spork3245]

11 minutes ago, Commissar SFLUFAN said:

 

OK - that's not quite what I had in mind for the exclusivity agreements so it's a misinterpretation on my part.

 

Yeah - I see no issue with a vendor/customer exclusivity agreement of the type you described as long as it doesn't run afoul of the various aspects of anti-trust.

Unfortunately, that’s the type of agreement I had lawyers tell me are classified as non-compete and warned that the FTC may eliminate them making any contract null and void. 

[Commissar SFLUFAN]

1 minute ago, Spork3245 said:

Unfortunately, that’s the type of agreement I had lawyers tell me are classified as non-compete and warned that the FTC may eliminate them making any contract null and void. 

 

That interpretation appears to be stretching the FTC rule well beyond the breaking point.

[Commissar SFLUFAN]

Aaaaaaand here's the first lawsuit, filed by a business tax firm in federal court in...wait for it...Texas!

 

[CheeTo]

We have both non compete clauses and exclusivity agreements where I work. I love the idea of disbanding on non competes but understand how the exclusivity isn't the same. For us, they will pay for education such as an MBA but you have to stay x amount of time post diploma. I'm fine with that agreement.

[Commissar SFLUFAN]

1 minute ago, CheeTo said:

We have both non compete clauses and exclusivity agreements where I work. I love the idea of disbanding on non competes but understand how the exclusivity isn't the same. For us, they will pay for education such as an MBA but you have to stay x amount of time post diploma. I'm fine with that agreement.

 

Typically with those education benefits, you stay with the firm for a year or two or you reimburse the firm if you depart.  There really is no problem with those agreements as an actual, tangible benefit was received.

[CheeTo]

8 minutes ago, Commissar SFLUFAN said:

 

Typically with those education benefits, you stay with the firm for a year or two or you reimburse the firm if you depart.  There really is no problem with those agreements as an actual, tangible benefit was received.

Yeah, mine is a year. Seems a good trade.

[Commissar SFLUFAN]

8 minutes ago, CheeTo said:

Yeah, mine is a year. Seems a good trade.

 

It absolutely is!

[SaysWho?]

Some more articles explaining the decision:

 

U.S. bans noncompete agreements for nearly all jobs

WWW.NPR.ORG

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The Federal Trade Commission has voted to ban employment agreements that typically prevent workers from leaving their companies for competitors, or starting competing businesses of their own.

FTC votes to ban noncompete clauses that bar employees from working for competitors

WWW.CNBC.COM

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The FTC claims that noncompete agreements limit wage growth and increase prices for consumers.

 

[legend]

5 hours ago, Commissar SFLUFAN said:

More charitably, if a company invests a lot of resources in training its employees, I can see the argument that a non-compete clause is necessary to ensure that their investment doesn't suddenly pick up and walk out the door to a rival the day after training ends.  Is that enough justification for their existence as a constraint on an employee's ability to fully participate in the market?  I'd say it that it's not at all, but I'm not completely unsympathetic to that justification, as flimsy as it may be.

 

 

This is probably the only non-corrupt reason for it and I am somewhat sympathetic to it. If people regularly joined a company inexperienced, were trained, and then quickly left for another company, the outcome would be that companies would stop hiring inexperienced workers, which would be an absolutely awful defect-defect equilibrium for society.

 

However, I don't think this is all that regular. If you're good to your employee, they will probably want to stay with you because consistency is convenient. If you treat your employee badly (bad compensation, bad management), then you really only have yourself to blame.

[Comet]

8 hours ago, Chris- said:

Great, now do non-solicitation clauses next!

Agreed, got into a legal tussle over this one a few years ago. 

[Gavin King]

Agree with most in this thread. I've been in the pharmaceutical benefit management industry for 13+ years and non-competes (typically can't work for competitor for 1 year after departure, even if laid off or fired), non-solicitation (can't recruit former coworkers, typically 18 months after departure), and NDAs (can't reveal confidential or proprietary information) are pretty damn common place.

 

NDA is only one that makes sense and is fair IMO. Client lists for sales, proprietary tech, etc... yeah you can't just take that when you leave.

 

Non-solicitations are hard to prove an infraction beyond the obvious, but still it puts a limits on a free market for labor and should be banned. If a person wants to leave for a better offer or for whatever reason, they shouldn't be prevented by hearing of the offer just because it's coming from a former colleague. The whole idea of a career is to network and know people and this tries to stomp this down.

 

Non-competes suck because whether your low or high paying individual, you typically can't sit out of a job for a year... Going to another industry is still difficult as the definition of competitor is fairly broad, and even if you do, that can severely hamper your career. Companies use it as a scare tactic, and it works. Companies have in-house lawyers, an individual can burn $10-$50k on a lawyer. Even if they win, and get compensated back, that's a big risk, super stressful, likely no new employer will to touch you during the fight, and might not want to touch you after you have a reputation. Big picture, it's bad for the economy. Let bad companies suffer and die if they cant survive without putting handcuffs on their employees. Let good companies thrive by the increased access to a wider pool of talent... If they can offer more, they should have the best talent available. That's capitalism and it should work both fucking ways. /SoapBox

 

Last, totally fine with tuition reimbursement or other training classes as long as it's a simple stay for X amount of reasonable amount of time or pay back proportional amount back if you leave early. If it's 'arbitrary' training, or if it limits you in anyway after your last day of work then get bent. Good companies will train folks no matter what because that's part of developing your talent and building/maintaining your company. It's also a part of treating your employees well, if you continue to do that, most will stay, those that don't are a cost of doing business and will advertise their skills learned at your company throughout the industry.

 

Hopefully the courts don't mess this all up, but today is a good day. Thank you FTC.

[CitizenVectron]

Update from courts: nah uh

 

Judge delays ban on noncompete agreements for small number of employers | CNN Business

WWW.CNN.COM

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A federal judge on Wednesday preliminarily delayed a ban on noncompete agreements from taking effect for a handful of employers on September 4.

 

"Small number" could expand to all, of course.