When a government agency proposes a regulation that could help workers stop employer abuse, you can count on the big business lobby.
For example, the Federal Trade Commission's move to ban non-compete clauses in employment contracts that prevent former employees from starting work in their chosen field, sometimes years after leaving and often hundreds of miles from their former employer. One in five American workers – 30 million people – are affected by these cuts.
The FTC's goal is good. "The lack of competition harms workers and harms competition by preventing full-time workers from seeking better opportunities that offer higher wages or better working conditions, and by preventing employers from hiring qualified workers under these contracts," he said. its regulatory proposal. on January 5
On January 22, the US Chamber of Commerce breathed a sigh of relief with an op-ed published in the Wall Street Journal by Chamber President and CEO Susan P. Clark.
By preventing workers in the labor force from seeking better opportunities that offer higher wages or better working conditions…the lack of competition hurts workers and hurts competition.
Federal Trade Commission
According to Clark, the proposal was a sign that FTC Chairwoman Lina Khan "will not let the law or the constitution get in the way" of trying to level the playing field between employers and employees.
He writes that the chamber will fight the ban "with all means at our disposal, including litigation."
A few things about it. Clark puts his thumb on the scale, citing the FTC's goal as a non-competitive "settlement."
In most cases, these are not contracts in the sense that they are the result of negotiations between the employer and the employee. Rather, they are restrictions placed on employees by companies, often hidden in the fine print of employment contracts.
Employees often do not know they are employed until they move from one company to another and threaten to sue their original employer.
Moreover, it is clear that the House is concerned not with the non-compete clause but with the intention of the Khan-led FTC to take a tougher stance against unfair competition practices.
If the commission has the power to prohibit non-compete terms, Clark writes, "there is no aspect of employment or commercial transactions that it does not have the power to regulate or prohibit arbitrarily," Clark writes, more than a bit of paranoid concern. “You don't like the pay gap between executives and non-executives. The FTC may find it unfair and regulate it."
The House is taking a new, more effective approach not to the rules themselves, but to the rules the FTC is introducing in 2021, and the new proposal is a clear example of that.
We will talk about this in a moment. First, let's look at non-compete clauses in general.
The popularity of these items is decreasing at the state level. In three states, the law does not clearly define them: California, North Dakota, and Oklahoma.
But 28 states ban it for certain professions (often doctors and other health care workers), 11 states ban it for low- or moderate-income workers (Nevada makes less than $14.50 an hour), and nine states ban it. long-term movement (usually more than a year). Twelve states impose other restrictions on non-competes. Many of these restrictions have been in place for the past three years.
In submitting its proposal, the FTC is following a directive from President Biden. In his 2021 executive order to promote competition in the US economy, Biden directed the FTC to investigate anti-competitive clauses and "any other workplace practices that unfairly restrict worker mobility."
Big business has nothing to do with non-competitive items. "Right-to-work" laws, beloved by employers and conservative politicians, run counter to the principles unions supposedly stand for. However, they have a unique ability to drive down wages and lock workers into low-quality jobs.
Traditionally, non-compete clauses have been justified to protect a company's trade secrets. Over time, they have expanded to include unreasonably low and minimum wage workers and independent contractors who do not have access to their employer's confidential information.
For example, the fast food chain Jimmy John's prohibited its employees from working within a three-mile radius “any other business that sells wrapped or wrapped items, hero-style, deli-style, pita breads and/or sandwiches. " He filed a lawsuit in Illinois in 2016, two years after he left any Jimmy John's stores and businesses. Gen. Lisa Madigan. The franchisor agreed to a settlement clause in Madigan's lawsuit and a second lawsuit filed by New York state. , to leave.
That same year, New York lawyers. CEO Eric Schneiderman forced the medical laboratory company to drop non-compete clauses that prohibited employees from working for other companies within 50 miles of the company's headquarters within nine months of leaving the company. In these cases, technicians visited homes and offices to perform routine physical examinations, such as blood draws, urine samples, and blood pressure measurements.
Academic studies cited by the FTC, the White House, and the Treasury Department have shown that 38% of workers have worked with this substance at some point in their working lives. Researchers from the Universities of Michigan and Maryland found that only one in 10 workers negotiated non-compete terms, and about a third were offered a clause "after accepting an existing job offer."
On average, non-compete clauses reduce hourly wages by 2% to 21%. In 2008, Oregon banned non-compete terms for part-time workers, which "improved Oregon's average employment situation, job mobility and employee turnover," according to a study by Michael Lipsitz of the FTC and Evan Starr of the University of Maryland. affects working hours".
Non-competes not only lower wages and reduce job mobility, but also scale down. They reduce the opportunities for highly paid and educated workers to start their own businesses.
The lack of competing applications may be a key factor in Silicon Valley's development as an innovation hub. In 1957, eight key employees of Shockley Semiconductor left the Palo Alto company to form their own company, Fairchild Semiconductor. (An incompetent and violent leader, Shockley called them the "Traitorous Eight").
In 1968, eight moved again and Intel Corp. they created among other things. As UC Berkeley political scientist Annalie Saxenian noted in her 1994 book Regional Advantage about the evolution of Silicon Valley, Jean Horne, one of the eight, has launched more than 10 new companies in recent years.
If Shockley wanted to limit the "traitorous eight" to non-compete agreements, the creation of Silicon Valley might have been more difficult.
This brings us back to the FTC initiative. This is part of a clear shift in the way the Commission approaches its regulatory responsibilities. Until 2021, it took a case-by-case approach, filing or threatening lawsuits against companies alleged to have engaged in anti-competitive behavior and, in most cases, settling out of court.
In 2014, former Commissioner Joshua D. Wright and former FTC attorney Jan Rybnicek said the result was "uninteresting, if not unusual" enforcement by the commission for more than 100 years.
"One hundred years … is a long time to evaluate the Commission's approach in isolation," they wrote. "The results of the experiment are no longer impressive." The jurisprudence on unfair competition practices has been unpredictable and ad hoc, they argue, supporting a system of policy statements that predetermine unfair practices.
That's the approach the FTC is taking today. No wonder the Chamber of Commerce is downsizing. In the past, the FTC has accused companies of settling their affairs through out-of-court settlements, including small settlement payments, and leaving no record of compliance with regulators.
The chamber has an ally within the FTC, Trump-appointed Commissioner Christine S. Wilson. Wilson disagreed with the 2021 committee's decision to change its enforcement approach and recommended banning non-compete clauses.
In his Wall Street Journal op-ed, Clarke acknowledged the earlier dissent, specifically Wilson's assertion that the FTC majority "reserves the right to unequivocally condemn any business conduct it deems acceptable."
(He said the 2021 majority decision was "the work of an academic or think tank member who wanted to outlaw unpopular behavior and reform the economy," a slap in the face to Khan, a former FTC attorney and former legal director of Open Markets. The Institute, i.e. yes, think tank.)
Wilson, who opposes the noncompete initiative, said 47 state legislatures have "shut down" the flawed clause. It brings the truth to its breaking point. Except for the three states where these provisions are completely prohibited, it is true that most states restrict them in some cases. Often they don't, lawmakers didn't choose to ban it, which is clearly different from his choice.
Commissioner Wilson seems to have forgotten that in proposing a general rule against non-compete clauses, he was doing what the Commission had requested in an earlier dissent. After the commission rejected that approach, he complained that by not providing specific guidelines, "companies are left in the dark about how to adjust their behavior to avoid the commission's problems."
He added: "Due process requires that the lines between legal and illegal conduct be clearly drawn."
Now, he complained, the proposed noncompete ban actually draws that line, "briefly condemning conduct that many find offensive."
Actually, the FTC is not that short. It gave the public 60 days to comment, leaving open the possibility of amending the proposed rule based on those comments and their subsequent analysis.
In other words, the FTC is taking a measured approach. Evidence was gathered on non-compete provisions, a proposed rule was developed and submitted for public review. Well, yes: Isn't that the role of a regulator?
After all, isn't the regulator's job to condemn behavior it deems unacceptable? The alternative is to let things slide, which is the FTC's old approach. Do this mess a favor.
This story originally appeared in the Los Angeles Times.