How a Noncompete Agreement Ban Could Add $300 Billion to Worker Wages | WSJ

The Federal Trade Commission proposed a new ban on noncompete clauses, which the agency says hurts workers and competition. Companies argue they protect trade secrets. WSJ breaks down what a federal ban could mean for workers and businesses.
Photo illustration: Jacob Reynolds
#FTC #Employment #WSJ

[@sasshole8121]

Companies may claim that the non-compete clauses are to protect trade secrets, but if the main advantage is that employees are prohibited from moving on to higher-waged jobs then that is the main incentive for companies to keep the non-compete clauses regardless of what their claims are.

[@markuswunsch]

For companies it doesn't make any sense to keep employees who are unhappy with their payment because a badly treated employee will not perform as well as an employee who feels treated fairly. So Non-Competes should really only be used to protect trade secrets, also from a business perspective. A famous German entrepreneur once said: “I don't pay good wages because I have a lot of money, I have a lot of money because I pay good wages. "

[@sasshole8121]

@@markuswunsch Really, then why did Apple and Google have to settle a lawsuit in 2014 involving wage-fixing? A lawsuit in which tons of emails exposed Jobs and other tech heads colluding to keep wages low? Wouldn't they have kept the wages fair for their employees because as you said, "a badly treated employee will not perform as well as an employee who feels treated fairly."

[@boostlife6370]

@@markuswunsch I mean it definitely takes away the leverage from an employee. They could just bounce back offers and move about different jobs and auction of there value to a company and see who is willing to pay most. There is definitely an underlying issue with companies profit to worker pay ratio it has grown significantly.

[@carkawalakhatulistiwa]

@@markuswunsch so our old boss, now has the right to curb someone's freedom in choosing a job

[@sairam6602]

You are right

[@RajShekharSingh]

One of the biggest reasons for California leading the nation in tech sector growth has been the fact that non-compete clauses are not enforceable in the state

[@lissettelopez8331]

Let's talk about that huge homeless, and crime problem in California, as well as high cost of living. Austin TX is the new leader of the tech sector.

[@doujinflip]

Texas is trying, but it has quite a way to go before our top tech engineers call it more than just an alternative location to base out of. Especially when kids are in enrolled in its public schools.

[@lissettelopez8331]

@@doujinflip Not everyone will be on board of course, but a lot of tech engineers are in Austin Already. But like what my uncle who works for Dell as a IT server tech told me, a lot of the companies are still doing remote, even now. The pandemic changed a lot of things. Some of the big players are not yet ready to move back in the offices yet.

[@Dutcheh]

@@lissettelopez8331 the only reason tech would ever move to texas is because texas doesn’t care about the rich taking every advantage. No company would move to texas except because cost permits it. Texas ranks worse than california in every metric. Stop fooling yourself. You’re acting as if companies leave california because it’s some awful state. They do it because there is an underdeveoped southern state that panders to the elite

[@lissettelopez8331]

@@Dutcheh Hey I didn't say it, but the ones that did, had a lot more skin in the game and made the move.

[@LegitBacKd00rNiNJa69]

YES 100%. Non-competes should only exist when you're buying out a Business' not hiring an employee!

[@couragewon]

Away with non-competes! I have been hurt by one in the past as an employee

[@dianahill5116]

Consider if people put non-competes rules in their prenuptial contract. Perhaps stating; that if they got divorced; that "you" could not partake certain behaviors and requiring you to wait an indeterminate amount of time after the divorce, before beginning another relationship.

[@fladave99]

Existing non competes basically ONLY protect EXISTING CUSTMOERS and legally in no way can restrict a right to work in a competitive profession for a period of time in a geo region. If a person signs an illegally restrictive agreement that is illegal is on them and can be overturned and cannot be enforced. The only change they can make is to allow POACHING OF CUSTOMERS which will be threatening to our society. This is basically flashy politics because it will be overturned. If you FIRE a worker, non compete is null and void. Non compete only REDUCES employment because companies will hire m ore carefully

[@Subgunman]

I was hit with a non compete letter after working for one company. Funny I never signed or was notified of such a contract when hired. The firm that hired me was a franchise of a large national company. I replied beck asking for a copy of the document I supposedly signed. They could not produce one. It was obvious to them their franchisee failed to get the document signed. Net result the franchisee tried to 1099 my employment after withholding taxes. Turned this over to the IRS for further investigation. It did not bode well for the franchisee. My policy today is, you want a non compete, you will pay me my full salary for duration of contract as well as 100% of all withholdings at your expense. Fair enough.😊

[@jaridkeen123]

It should be illegal because it also makes it so Tech Workers and Engineers cannot make any technology on there own time. If i make an invention while working at my company they own it. Even if i did it all on my own time.

[@pedroaragaodefreitas1758]

I may be wrong, but I think it only applies to intelectual assets creted either using the company's ecossystem/assets or literally while working for the company (i.e. during working hours). So as long as you don't use your corporate github account, components/libraries/etc from the company or knowledge that you gained from the company (via internal documentation, company trainings and the sort) you should be fine. Otherwise, contributing to an open-source project while being employed anywhere would mean that the company owns that contribution, which would hardly be sustained in any court, exactly because the company doesn't own you to begin with.

[@gustavogallindo8145]

I don't think those problems are the same. If you're working at your own time in a project that is in direct competition with the company you are employed, there is a clear conflict of interest. But non-compete are theoretically created to avoid competition to get access to ay internal insights that gives your company some advantage (in practical terms there is the fear mongering when people try to find a better salary). The contracts that give ownership of the company of anything you produce are meant so the company can appropriate any good ideas you have (they are not paying you just to type the requirements into code, they pay for the ideas in the process too). I'm not sure that would be legal in all places if your side work has nothing to do with the company.

[@HH-le1vi]

You can absolutely make things on your own time and the company can't do anything about it. Just don't tell anyone. If they don't know, they can't claim it

[@dhidhi1000]

@@HH-le1vi depends on the country

[@HH-le1vi]

@@dhidhi1000 that's why you just don't say anything

[@BusyBodyVisa]

There is a place for noncompete clauses but they've been overused and abused by unscrupulous employers that don't want to have to compete for employees with higher wages/better benefits. They shouldn't be eliminated but they should be severely curtailed.

[@fladave99]

Existing non competes basically ONLY protect EXISTING CUSTMOERS and legally in no way can restrict a right to work in a competitive profession for a period of time in a geo region. If a person signs an illegally restrictive agreement that is illegal is on them and can be overturned and cannot be enforced. The only change they can make is to allow POACHING OF CUSTOMERS which will be threatening to our society. This is basically flashy politics because it will be overturned. If you FIRE a worker, non compete is null and void. Non compete only REDUCES employment because companies will hire m ore carefully

[@joebullwinkle5099]

Employers only have themselves to blame as they have instigated non compete clauses for positions that have no proprietary information. It’s been used to deny people the opportunities to move up in their remuneration packages and or to stop people leaving and suppress their wages. Non compete clauses should be restricted to only those few senior executive positions in a company where someone could well use the hard won proprietary IP against a current employer. However when you have China, who appears to have unlimited intelligence gathering capabilities and steals any and all IP, it is sort of a mute point that anyone has non compete clause in their employment contracts.

[@Mike_Genisys]

It make sense at C-Level but saying the pizza delivery guy can't deliver pizza for another competitor is just crazy.

[@BigSaenVEVO]

Ruling over an employee comes to a hard stop after they quit the job. End of discussion

[@JJSmalls]

I signed non-competes before, and I also had a lawyer look over one of them for me. He basically said that non-competes have to be specific, or they're not enforceable. Depends on state though. States vary, though. The real danger is an arbitration clause in a different state than your own. Talk to a lawyer. Line stuff out and send it back to review. It's probably a red flag anyways if the company won't budge.

[@johnreyn19]

This action is definitely necessary. I would go so far as to hope that congress could pass legislation on this issue. We live in a capitalistic economy, not one of indentured servitude. Employers should not be permitted to cripple their employees from taking opportunities in exchange for a job. If they want employees to stay they need to either pay (in retention bonuses or stock options) or treat them so well they want to stay on. I am not a fan of the Biden Administration but will give credit where credit is due. This is something that is overdue and needs to be enacted into law.

[@splashmt99]

I can’t imagine what trade secrets a hair salon is protecting with non competes.

[@ac1455]

They discovered a new hairstyle?

[@myaccount74]

Takes a long time to train a hairdresser. Without non-compete it’s difficult to trust a newcomer and spend a year or two on trainings, just for him to open another shop next door and bring half your customers with him..

[@splashmt99]

@@myaccount74 and the hairdressers that pay for their own training don’t get to protect their own investment?

[@myaccount74]

@@splashmt99 go a different shop, dont sign the agreement, or keep the agreement period short, say 5 years, with some other clauses to protect your worker rights, though they should be protected by general laws anyways. A ban makes it so that nobody has ANY leeway

[@barvdw]

@@myaccount74 maybe a clause to reimburse them for the training if you leave to the competition within X time after the training could be added? From a sector I'm more familiar with, railroading (not the US), there is no private train driver school, so railway companies train their own drivers on the job. At a certain moment, new entrants would not train their own drivers, preferring to poach drivers from the incumbents. Since then, the railway companies have included a clause that mandates a somewhat longer notice period than is usual, and if you leave withing 10 years of hiring, you have to reimburse (part of) the training, but only if you leave to be a train driver elsewhere, not if you leave to become, I don't know, a hair dresser or a teacher or something.

[@lambertois11]

Did you know that in Canada the courts have crushed all the non-compete agreements. The court crushed the non-compete agreements because these agreements were not negotiated fairly. The companies used strong arm tactics : if you do not sign the non-compete agreement you do not get the job. Also job nobility is a right guaranty by the constitution.

[@jimknarr]

The Republicans won't go for that as that will upset their rich friends.

[@Dendarang]

Literally anything that boosts wages is good in a consumer based economy, and it's the best and easiest way to further economic growth.

[@Leto2ndAtreides]

It's really only good (for some) if its happening disproportionately and raising up a subsection of people. If salaries universally went up, you'd get a similar boost in inflation and your buying power would come back down to where it was before. Of course, if salaries rise in one country (and assuming that that country is profitable enough), then through international trade, those people could be better off as long as people in other countries don't get a similar boost. But that also means that your labor market has become more expensive, and it's harder for you to produce and sell stuff to the international market. Which means that you're probably not going to be able to sustain that indefinitely.

[@Dendarang]

@@Leto2ndAtreides Inflation doesn't eat up most or all of salary increases, that's a conservative talking point against raising the minimum wage. Inflation adjusted salaries today are something like 12x higher than what they were in 1900, that would be impossible if inflation was eating up most or all of salary increases. And US already has some of the highest salaries in the world, higher than any other big country only beaten by the likes of Gulf states or Switzerland, and has trade with the rest of the world. Relationship between salary and export competitiveness isn't linear or that simple, see Germany or Japan. And, unlike Germanny or Japan, US has massive internal market and vast majority of US economy doesn't depend on international trade but on the internal market.

[@O_Canada]

​@@Leto2ndAtreidesinflation doesn't occur when wages rise. It occurs when more currency enters and economy than goods and services produced.

[@YourMom-vl2sp]

Probably should pay and treat your employees better so they don't jump ship 🤣

[@benjamindover4337]

I was subject to a non-compete which I had to accept in order to receive my severance payment

[@Master-ls2op]

not valid. you were being held hostage.... sign it and ignore it.

[@spamcheck9431]

Just make the non-compete void if you fire/layoff the worker. They have a trade secret? Then sounds like you better pay them.

[@milom7]

Is United States. The only country on the war were working it’s not a human right? because how is it legal for companies to ban me as a worker to get a job in another company just because this company is the competence???

[@karthigeyan143]

Think company can fire employees but after firing employees are not allowed to join similar companies due to this law...

[@andreynazarouk]

Talk with your coworkers. Discuss your wages. Unionize. Force Employers to pay fairly.

[@MissCandy350]

Long overdue!

[@txbre8758]

This is also extremely relevant for those that get laid off

[@lordInquisitor]

Hoping to see some worker's options in the comments and not just a top down perspective

[@mrmakeshft]

I see the employee boycotting coming

[@auro1986]

how? this will introduce quality where it has been absent and improve quality where it's believed to be there

[@ericeandco]

It not just wages. These non competes prevent people from having second jobs, getting a job in their field for up to two years, they put in clauses where you give up your legal rights. In case the non compete might not hold up they’ll put the same language in other employment contracts. It’s disgraceful they get away with it.

[@dallaskline9615]

They need to be banned!!!! Please 🙏🏼 make this happen!!!

[@JamielDeAbrew]

Why not link it to pay thresholds. Low pay means an employee isn’t valued enough to know trade secrets. They shouldn’t have non competes. Perhaps below $100k per year. Medium pay could have short non competes. Maybe $100 - $150 could have a 3 month limit. $150k - $250k - 6 month limit 250k - $1 million - 12 month limit Above $1 million - 5 year limit

[@arshiarassi9697]

Because this is a huge problem in the medical community. Just look at most of the comments on the FTC comment page, the majority are healthcare workers. Most of us are trapped (including myself). There are no trade secrets in healthcare, nobody is practicing secret or proprietary medicine. There's a concept called "standard of care" that any well trained healthcare professional should be aware of. Also, these companies did not teach us our trade... that was my 4 years of medical school and 4 years of residency that taught me how to do my job, not some CEO with a business degree. These fools have no idea how to practice medicine (which is a whole separate issue). When I left my first job, a ton of my patients were left without their doctor. Luckily, I negotiated my noncompete down to 5 miles and I took a job 5.1 miles away, but many physicians are required to uproot their entire lives and families to practice in another state. All those relationships with patients also destroyed. We're sick of being left out/purposefully excluded from basic labor/human rights just because of our titles, we're people too. This change needs to be across the board for everyone, not just certain income levels.

[@shmookins]

I don't understand: how does non-compete protect secrets if it is only applied for a few months? (3 months in the gaming industry and 18 months in the Amazon example here?). It's not like trade secrets or customer lists will become redundant in that short time.

[@G.RobertMoore-dk4sz]

Typically they can apply up to 2 years and geographically anywhere that company does or is able to do business

[@vincentorlando6767]

Non-compete's if applied properly and for a reasonable time does protect companies from competitors raiding employees, trade secrets, stealing customers, etc. Usually if key employee, like an executive, higher level sales personnel, employees with access to trade secrets should these non-compete's apply. It's common for competitors to lure employees away, get the info they needed, then discard the employee

[@couragewon]

Non-solicitation clauses are similar to, but distinct from, non-compete clausea

[@__________5737]

Also non disclosure addresses IP

[@decreer4567]

The problem is that businesses abuse non-competes

[@JJSmalls]

But this is what confidentially and non-disclosure clauses are for. Non-competes are just a way to twist your arm into staying at a company.

[@dstblj5222]

Honestly for key positions like that they should be paid none competes, IE if you want to hold someone of the market for 18 months you have to pay them for that 18 months

[@DC-wg1cr]

"Free market" *non-compete*

[@rocknrollchemist9406]

There should limits to how long and not binding if company lets you go. Many folks agree to employment only to have one slide across the table later.

[@tjlambaes]

I’m a lower wage worker that could be a high paid worker that is suffering from a no. Compete.

[@nk9083]

The 13th amendment supposedly ended slavery and involuntary servitude. Frankly, non competes are violation of the 13th amendment and an attempt by businesses to re-institute involuntary servitude (i.e. slavery).

[@ambassador8524]

Finally The little guy gets a little Win.

[@RichardAmesMusic]

How many people have actually been held accountable for violation of a non-compete clause? And what were the terms under which they were challenged? As far as I can tell, non-compete clauses are basically ignored.

[@j.k.1769]

I know of several cases where employees were sued or received cease and desist letters. Luckily for the individual, they were defended by their hiring company who had deep pockets.

[@RichardAmesMusic]

@@j.k.1769 Yeah cease and desist letters are pretty common and also ignored as far as I can tell. I'm asking about people actually found liable for violation of a non-compete clause. Or evidence that they settled out of court.

[@j.k.1769]

@@RichardAmesMusic you won't get evidence they settled out of court. Most of that is sealed. See hush payments to assault victims.

[@RichardAmesMusic]

@@j.k.1769If nobody has any evidence that this goes on then why does the Biden administration give it national attention? And why does WSJ report it? Both are based entirely on a hunch? Seems somebody would present some kind of justification other than "in theory, this happens."

[@j.k.1769]

@@RichardAmesMusic because there are people such as myself that would be willing to take the leap into entrepreneurship minus 2 risks. 1. Healthcare 2. Non compete layover periods. This would eliminated one of the two issues and Obamacare provides a way to cover the other. Large Corporations have too much control over the economy.

[@iliaalekov2949]

it is my impresion that there is socialism type of system for businesses in the US and almost serfdom- like approach for most of the workers...

[@Myanmartiger921]

@@m3x910agree little china with its trillion dollar banks cant compete with little gold-man sachs

[@ankitait2]

It is actually corpo-socialism. Essential services are still privatized and expensive, but socialistic regulations are still followed.

[@tonyotag]

How will 1099 income based agreement work per new regulation? I think the non-compete regulation targets W-2 based income?

[@jazilzaim]

Thank you FTC! Finally this could be really good for millions of people and innovation!

[@jackcarraway4707]

Employers are not entitled to your labor.

[@AlexanderNewman-v1x]

Thank you Lina Khan. Slavery shouldn't be legal in 2024.

[@jimpeterson6730]

Another reason for companies to avoid training starting employees. This can only be a bad thing.

[@houchi69]

I got a better solution: Why don't we just increase wages at the federal level?

[@dhidhi1000]

because the government doesn't choose the salaries, the companies do lol

[@JJSmalls]

Have to do more than that. UBI, cancel rent, government provided healthcare.

[@chon3493]

The government is moving for the 18% workers. How about doing something for the remaining 82% ?

[@falnica]

And now a year later it is a reality

[@myaccount74]

Yeah that’s a 500 billion decrease in corporate profits. Noted!

[@khanmd21]

I have read Building a second brain, it really has changes how i outline everything.

[@pablosalazar4954]

We LOVE Lina Khan!!!

[@markmaugle4599]

At what wage level are non compete agreements being used? The flip side is it will drive up the prices (company clauses).

[@fahdh]

Common among physicians 200k-700k salary depending on field

[@Ruffian1790]

I was coming into a $16.50/hr office admin support role at a regional-scale company when I (idiotically, foolishly, my fault and responsibility all the way) signed a 20-ish page "omnibus" hiring document that included a noncompete clause. I was a glorified secretary.

[@zininajid]

Not all non-competes are bad

[@streampunksheep]

Could this really benefit workers?

[@nunyadambusiness3530]

I mean, why should workers be barred from moving on to a different company if its offering better pay and competitive benefits. Capitalism is meant to be COMPETITIVE, not this "non-compete" bs, its the reason why our middle class is going to continue to shrink, these non-compete clauses. Go to China if you wanna tell people what to do.

[@JBCookies8885]

Absolutely. 20% of the current workforce has restrictions on who they are allowed to work for. If they quit their job and move to a competitor, they can be sued. (Happen with my sibling. They settled out of court.) With no non-competes, workers are free to be employed anywhere. The challenge is showing how extensive the issue is. I heard of a non-compete given to Subway sandwich employees. Not at HQ but the front line workers. Why do they need a non-compete? It is a system that had good intentions at first to protect company secrets but has gotten to the point of keeping workers from finding better jobs.

[@coolzayrock5288]

How it wouldn’t?

[@yaqizhang3497]

Actually,China also has "non-compete",some companies may require you sign it if you wanna resign. However,the wages isn't enough compared with the boss.

[@nunyadambusiness3530]

@@yaqizhang3497 Can't make you sign it if you "no-show quitting" and already moved onto the competitors business. Avoid the resignation by just not showing up.

[@Leto2ndAtreides]

It's difficult to predict how this will fall out if it's done at the level of the country. On one side, it tends towards golden handcuffs - stock that will vest at the end of the year or similar. But ultimately, how much can be paid is a function of how much money can be made in an industry and how much consumers are willing to pay for something... For products and industries where the end user can't be charged more, employees can't really be paid more. Companies like Google, Apple etc. are a rare case because they are actually quite profitable and thus it's easier for them to pay out $500K in total comp to software engineers (for example). But that's not the case for the vast majority of companies.

[@adityaln9361]

♥

[@charleneterrell]

If Microsoft is willing to work with Google on AI CPT, I (Charlene Terrell) can only preliminary agree (considering ongoing conditions and circumstances). There are some things that need stop (such as narcissistis mothers among other things and people) as she is tied to Gatess who is tied to Microsofte. Request to submit this statement to the US Supreme Court.

[@nusionx]

There should be a ban on vocal fry

[@alexander15551]

I understand the desire to expand employee opportunities. But, how can they do this without reducing the security of intellectual property?

[@JJSmalls]

Non-compete is not the same as non-disclosure and confidentiality agreements.

[@RavarsenBlogspot]

Noon complete shouldn't be banned, it should be regulated. That'd be win win

[@useyourtimewisely]

can anyone please summarize this video for me

[@ichheisesaud2705]

Entitlement at it’s finest.

[@diii5358]

Yes, entitlement from the corporations using non-compete agreements.

[@richardgomes3228]

Do you acknowledge that there are legitimate reasons for a company to require a no compete clause as a condition of employment?

[@purp3870]

Ayo

[@Money_Fox]

non competes seem fine