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FTC Proposes Rule Biden Requested to Ban Non-Compete Clauses

Following up on a promise Biden made early in his Administration, the Federal Trade Commission has posted for public comment a rule banning noncompete clauses. The rule doesn’t grandfather in any existing noncompete clauses; it nullifies all such existing contract provisions and requires employers to let current and former employees subject to such clauses that those clauses are gone.

The FTC says banning noncompete clauses would be good for practical liberty and the economy:

The Federal Trade Commission proposed a new rule that would ban employers from imposing noncompetes on their workers, a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses. By stopping this practice, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.

…“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said Chair Lina M. Khan. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition” [Federal Trade Commission, press release, 2023.01.05].

The rule was approved by the two FTC commissioners appointed by President Biden, Chair Lina Khan and Alvaro Bedoya. Trump appointee Rebecca Slaughter also approved the rule, saying in a joint statement with Bedoya noncompete clauses are “deeply troubling“:

Although sometimes referred to as noncompete “agreements,” they rarely represent actual agreements. Instead, they are often imposed on workers with no ability to bargain as a condition of employment. Even when noncompetes have been ruled unenforceable by courts or outlawed by legislation, firms continue to use them, as was alleged in a recent case the FTC settled over noncompetes imposed on minimum wage–earning security guards.

Workers restrained by noncompetes are unable to pursue certain job opportunities and are therefore deprived of higher wages and more favorable working conditions and benefits. Similarly, businesses that need to hire workers are inhibited from attracting and hiring services. Even more alarming is the evidence that shows noncompetes reduce earnings for workers not individually bound by them. Studies also show reduced entrepreneurship, new-business formation, or both when workers are inhibited by noncompetes. Finally, American consumers can suffer from noncompete clauses through paying higher prices for lower-quality goods and services. For all these reasons, it is clear that it is more than appropriate for the FTC to use our rulemaking authority under Sections 5 and 6(g) to address noncompete clauses in employment contracts [Commissioner Rebecca Slaughter, statement joined by Commissioner Alvaro Bedoya, “On the Notice of Proposed Rulemaking on Non-Compete Clauses,” Federal Trade Commission, 2023.01.05].

Trump appointee Christine Wilson voted against the rule, saying it “represents a radical departure from hundreds of years of legal precedent,” lacks an evidentiary basis, and will “certainly will be challenged” in court.

President Biden seems unconcerned by Wilson’s threat of the usual Republican plutocratic jamming of good government and honest capitalism. At his Cabinet meeting yesterday, President Biden welcomed the FTC’s ban on non-compete clauses for sandwich artists everywhere:

It’s one thing to say you have — you can’t work at a — inside, in a technology company on a special project that has scientific consequences and move to another company without a non-compete agreement.  It’s another thing to say you’re working for Subway and you can’t walk across the street and go to Jimmy John’s and get a 20-cent raise.  What the hell is that all about other than keeping wages down?

And, so these agreements block millions of retail workers, construction workers, and other working folks from taking better jobs, getting better pay and benefits in the same field [President Joe Biden, remarks in Cabinet meeting, 2023.01.05].

If you believe in competition and capitalism, then you should believe in President Biden and the FTC and support this rule against non-compete clauses.


  1. John 2023-01-06 07:35

    Non-compete [non]agreements are a travesty the monopolistic oligarchs foist upon us to reduce competition and reduce wages growth. Oligarchs do not like to compete for talent.

  2. sx123 2023-01-06 07:42

    For certain govt agencies one has to swear to secrecy for many years after leaving employment. Why should private industry be any different?

    Don’t fall for the sandwich shop analogy trick. Many restaurants exist because of their secret ingredients amd recipes. These are called Trade Secrets.

    If you don’t want to sign a non-compete clause, don’t work at the company.

  3. Nix 2023-01-06 08:01

    Sounds easy.
    Back in ‘96 the company that I worked for was bought by a large distribution company out of Houston.
    Company credit card…Gone.
    Wage reduction…mandatory.
    Non-Compete… “Voluntary”
    But, if you don’t sign, you don’t work.
    I had a house payment, car payment,
    2 kids 8 and 5.
    Oh ya , I’m going to just quit the career
    that I had for 20 years because I’m not signing?
    Sorry SX, Non compete agreements aren’t agreements at all.
    They are B. S.

  4. O 2023-01-06 08:26

    If the secrets are so important to the well being of the company, then the company ought to be willing to pay workers the value needed to retain their loyalty. This all seems like the perversion of current capitalism that has minimized the value of the worker and the inflation of any and all other economic factors.

  5. sx123 2023-01-06 08:30

    I consider it unethical to use prior employer developed techniques and company secrets at the new company anyhow, so non-competes don’t bother me.

  6. Anthony Renli 2023-01-06 10:00

    There are cases where non-compete clauses make sense – but they must be limited in scope and duration.
    Popular Radio DJ’s, Local TV News Anchors, or other local “Personalities” who trade based off of name recognition that was paid for and promoted by the local media company – This MIGHT make sense. You can’t go work for the competition in the same town where you worked for 6 months. THIS isn’t an abusive non-compete.
    Or saying that a Lawyer for can’t go to a competing firm in Sioux Falls – unless they sign papers explicitly stating that they will not try to take their clients with them.
    Or Executives can’t immediately go to the competition bringing over trade secrets, product roadmaps, and future plans for their existing company.

    The problem is I’ve seen some absolutely draconian non-competes. Things that apply to front line employees – people who don’t have access to Trade Secrets, proprietary data, or the like – basically saying “You Can’t Work In This Field for Anyone, Anywhere, for the next X years.” No, these aren’t enforceable. But they are used to keep people out of a sense of fear.
    Because they low level employees aren’t in a position to fight it if the company with the abusive non-compete. I remember at a job I very nearly took (almost 20 years ago) they basically wanted me to sign a non-compete that if I quit or was fired I couldn’t work in my industry in the US for a 2 year period – because they had offices around the country. I laughed in their faces and went elsewhere – but this is WHY we need to look into this.
    I would have no problem with non-compete agreements if they only applied to “Salaried Employees making over ” – but that isn’t how they are being used by many businesses.

  7. O 2023-01-06 10:17

    Anthony, not being from that world, I don’t understand why that employee cannot command a salary that represents that value instead of only a non-compete that enforces that loyalty? It seems a question of asset priorities. If we had a stronger general view of labor in the labor-management relationship, this would not be such an issue now. This seems part of the larger tipped scale in the favor of the investor class over the labor class.

    Intellectual property is just like physical property: I cannot take my company’s computer when I leave; I cannot take the colonel’s 11 herbs and spices recipe when I leave. My talents are mine to take and use as I please.

  8. Anthony Renli 2023-01-06 14:13

    The employees for whom non-compete agreements might be reasonable- they generally CAN command either the higher salaries or other benefits that would NORMALLY ensure that they can be trusted, but these people are generally NOT on the labor side of the labor-management relationship. This is also at the point where money becomes less of a major factor as opposed to a variety of other factors. They are also the ones who may very well need some kind of non-compete because jumping ship can be very lucrative, and proving theft of intellectual property is difficult, expensive, and messy. AND by the time it could be proven, if it could be proven, the damage would be done.

    The issue is they are being used on the labor side of the equation.
    THAT is the problem.
    They need to be specific, reasonable, and proportional.
    Saying that a salesperson at Sioux Falls Ford can’t leave to go sell at Billion Sioux Falls would be unreasonable.
    Saying a Quality Engineer at POET can’t leave to go work for Pacific Ethanol in California would be unreasonable because they aren’t jumping to a local competitor and they almost certainly don’t have any kind of proprietary knowledge or information that would suddenly give their new job some kind of competitive advantage.
    A corporate law firm in Cleveland saying that one of their partners can’t jump to another corporate law firm ALSO in Cleveland for a few months to a year could be reasonable. Saying that they can’t jump to a firm in Columbus or Cincinnati – probably not reasonable.
    Saying that the a senior programmer who designed the code for John Deere’s self driving tractors can’t jump ship to Autonomous Tractor Corporation to help streamline their code without waiting for an agreed upon period of time is significantly more reasonable. BUT they should be aware of this during contract negotiations and they should be paid knowing that this is a possibility.

    The problem, and the reason the FTC is looking into this isn’t the people who you could make a reasonable argument that they are justifiably under a non-compete clause.
    The problem is they are being imposed on people who are signing them under duress, or without knowledge of what they are signing.
    Far to many mid-large sized companies have abused this entire process.

  9. John 2023-01-06 14:13

    sx123, you clearly do not understand government or the difference between public service and money grubbing. You should stay clear of public service.

  10. Anthony Renli 2023-01-06 14:39

    An example of a BAD non-compete that companies have tried to enforce:
    Jimmy Johns had a non-compete clause for their employees in Illinois.
    NOT just executives.
    NOT just management.
    The teenager who made sandwiches at your local Jimmy Johns.
    Or the delivery drivers.
    They couldn’t leave and go to work at another sandwich shop within a 2 mile radius of another Jimmy Johns if they made 10% of their money from sandwiches for 2 years.

  11. Mark Anderson 2023-01-06 16:40

    Thank you Anthony Renli, I knew that Jimmy John’s was abusive. The name says it all. Subway is where you go to save yourself, that’s health wise of course, I know nothing about their payment of workers. I hope they do well by their workers, however my instinct isn’t always the best.
    Years ago I had to give up my Yuengling, my love, in a horrible divorce, because they forced the workers to give up their union. The dastardly Richard call me ” Dick” Yuengling did it. A typical right to work for less, more for me Republican.
    Costco, Whole Foods and In & Out Burger offer higher wages and benefits for entry level workers. I know Costco is socialism, they put local art up at Whole Foods, and In & Out Burger has a great name.

  12. sx123 2023-01-06 17:07

    Are they going to outlaw NDAs nationally too? There is little difference between an NDA and non-compete other than a non-compete usually has a reasonable time factor involved. NDAs can last forever…

    If you want to work anywhere, you’ll probably be signing NDAs or a non-compete or both. Companies don’t have to hire you, and you don’t have to work for them. So be careful what you sign and make sure it’s ultimately something you don’t care about long term.

    I don’t want to work for companies that don’t at least require NDAs, cuz if they don’t, they probably aren’t making anything cool.

  13. sx123 2023-01-06 18:27

    Big corporations win again. This is a terrible, terrible law for small startups that have few tools against big companies. This will remove another tool.

  14. John 2023-01-06 19:03

    Hey, if one thinks there should be free migration of capital . . . then why should there not also be free migration of human capital?
    “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” – Abraham Lincoln

    Choke on that, you capitalists.

  15. Mark S 2023-01-06 19:21

    Non competes has been the equivalent to unionization in the business world. The very thing they despise in the work force. As a right to work state, our legislators recognized that fact before Biden thankfully!

  16. larry kurtz 2023-01-07 07:57

    Now that the Earth haters have elected a Speaker Americans need to brace for attempts on the lives of our POTUS and VPOTUS. Joe is traveling to Texas tomorrow where he will be smack dab in the middle of harm’s way.

  17. jerry 2023-01-09 09:00

    Big corporations don’t always win. “Tractor maker John Deere has agreed to give its US customers the right to fix their own equipment.
    Previously, farmers were only allowed to use authorised parts and service facilities rather than cheaper independent repair options.

    This, as they say, is a big +++++++ deal. Booyah

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