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The FTC plans to curtail the use of non-compete clauses

economist.com

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Re: The FTC plans to curtail the use of non-compete clauses

#3
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.

Re: The FTC plans to curtail the use of non-compete clauses

#5

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 ground…

https://www.ftc.gov/news-events/news/press-releases/2023/01/...

https://www.whitehouse.gov/briefing-room/presidential-action...

https://mattstoller.substack.com/p/antitrust-enforcers-to-ba...

https://www.nytimes.com/2023/01/09/opinion/linakhan-ftc-nonc...

https://threadreaderapp.com/thread/1611025895388577792.html

Re: The FTC plans to curtail the use of non-compete clauses

#6
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.

Re: The FTC plans to curtail the use of non-compete clauses

#7

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 ground…

> 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.

This is an opinion article about the news, not a news article, though, so it focuses on the why its good, not the details of the FTC action. See, for the latter, from the source: https://www.ftc.gov/news-events/news/press-releases/2023/01/...

Re: The FTC plans to curtail the use of non-compete clauses

#10
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.

Expect to see this challenged in court.

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