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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

#31

Post by granzymes »

Retric wrote: post #25
granzymes wrote: post #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 emplo…

Non competes have a direct impact on interstate commerce so the Federal government has a clear mandate from the constitution. Non competes are rarely enforceable as written, so the FTC has a clear mandate from both the unfair and deceptive standpoint.

Obviously the Federal government is constitutionally authorized to regulate non-competes. That's not my argument at all. And the FTC is not banning unenforceable non-competes, the proposed rule bans all non-competes.

Regardless of which non-competes they choose to ban, however, the fact remains that this is the first time that the FTC is attempting to use Section 5 in this manner. It is very unclear that they have the authority to issue the proposed rule. My opinion is that they do not, and I think the courts will agree with me.

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

#32

Post by baron816 »

When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years.

That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training. Something like that would've been in my favor.

Maybe a better solution would be something like the government will pay a company if an employee leaves within some time frame after getting hired (2 years or so) if that employee gets a higher paying job in a similar role. It'd be tricky to structure correctly, but the whole idea is that what the government is really paying for is job training insurance. It mitigates the risk for firms for hiring people, thus making hiring faster and keeping people out of unemployment.

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

#33

Post by AlotOfReading »

sozin wrote: post #21
leoc wrote: post #11

Earlier quoted context omitted.

I'm not an expert, but IIUC the financial industry tends to pay full "garden leave" for employees serving out their noncompete terms https://en.wikipedia.org/wiki/Garden_leave , presumably partly for this reason.

This is correct — very common practice in trading (I am currently sitting out one now!). Generally they are 3-12 months in duration, although recently we are seeing much longer ones (24 months) from firms such as Citadel. You generally draw full base salary, and healthcare comes from COBRA. US-wide ban of non competes is good for hiring firms (they get the talent immediately), bad (allegedly) for firms from whom the…

Long-term garden leave is still unequal as you forfeit things like bonus (which can be a significant percentage of TC) and you can't practice the skills of your employment for months or years. Imagine going on leave from the financial sector in 2007 and coming back in 24 months later, for example.

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

#34

Post by toomuchtodo »

blendergeek wrote: post #29
toomuchtodo wrote: post #5

Earlier quoted context omitted.

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

I would prefer that those things would be mentioned _in the article_. As it stands, I came away from the article not having been enlightened on any of the topics you just linked.

Did the links I provide help with context? I am attempting to be helpful.

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

#35

Post by iancmceachern »

ghaff wrote: post #15
bushbaba wrote: post #2

This would be a big blow to California. One of the reasons I didn’t move to Washington was that my employer was known to sue for breaking the non compete if you headed to a competitor. Being employed in California protected me from said lawsuit.

While I'm all for making non-competes for employees unenforceable in general, I think their role is overplayed notwithstanding your anecdote. Otherwise you'd have a tech industry in Oklahoma and wouldn't have one in Massachusetts, which until fairly recently fully allowed for non-competes. (EMC in particular fought against legislative change but there's now a somewhat weak garden leave requirement--but it at least ma…

The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements. Also, the tech industry in California is an order of magnitude larger than that in Mass.

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

#36

Post by Spivak »

andrewjf wrote: post #12
munk-a wrote: post #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…

> 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 Yes. The proportion should be 100%, plus all benefits (401k, health, continued vesting of equity, etc). If you're being denied future employment then the employer can pay for it if it's that important to them. Possibly even more than 100% if they…

Which is why I think companies should have to “buy you out” in the event you get another job. If you get an offer and they want to exercise the non-compete they have to pay you total comp for that offer otherwise you can work there.

I’m sure in a forum of devs you’ll will think of plenty obvious “hacks” which are just fraud and our courts are perfectly capable of sussing that out.

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

#37

Post by iancmceachern »

Longlius wrote: post #23
epicureanideal wrote: post #13

What changed to get the politicians on board with this?

Non-competes have positively flourished in the tight labor market. I know a guy who works in PR who moved across the country to work for a company serving a completely different industry who dealt with aggressive emails from his former employer's legal team about enforcing the non-compete he signed.

I know a guy who was wrongfully persecuted for his non compete, it didn't even apply, but his former employers had friends in high places amd proceeded anyway. He lost his new job and it completely upended his families life.

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

#38

Post by ghaff »

munk-a wrote: post #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…

>current chilling-effect bullshit of overly vague and broad non-competes that are never intended to see the inside of a courtroom

I worked for a very small company for a number of years quite a while back. We basically wouldn't even look at someone who had a non-compete even if it "probably" wouldn't be an issue. The risk of having to fight some big tech company--who might also have been clients to some degree--was just too great.

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

#39

Post by xhkkffbf »

I realize that there are many times when non-compete clauses are examples of big companies punching down at low-level workers, but I've also watched them work out well for the low-level workers too. At least two of my friends have been good enough to be poached by competitors who were willing to pay them to take a 4-8 month vacation until the non-compete ran out. They loved the long vacation.

All things being equal, a fluid marketplace with many options is best for all sides. Businesses that are too strict with their non-competes also risk driving away potential workers. In my experience, the businesses only ask for the non-competes when they're giving someone a significant amount of responsibility.

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

#40

Post by neilv »

baron816 wrote: post #32

When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years. That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years…

> allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training

I favor training, loyalty, seeing a system through a lifecycle (rather than job-hopping before you see both cause and effect), etc., but...

Requiring an employee to stay at a company, especially in our current not-very-scrupulous business culture, sounds like a recipe for indentured servitude.

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