Friday, January 6, 2023

NYT: Federal Trade Commission moves to curtail non-compete agreements

Via the New York Times: 
In a far-reaching move that could raise wages and increase competition among businesses, the Federal Trade Commission on Thursday unveiled a rule that would block companies from limiting their employees’ ability to work for a rival.

The proposed rule would ban provisions of labor contracts known as noncompete agreements, which prevent workers from leaving for a competitor or starting a competing business for months or years after their employment, often within a certain geographic area. The agreements have applied to workers as varied as sandwich makers, hairstylists, doctors and software engineers.

Studies show that noncompetes, which appear to directly affect roughly 20 percent to 45 percent of U.S. workers in the private sector, hold down pay because job switching is one of the more reliable ways of securing a raise. Many economists believe they help explain why pay for middle-income workers has stagnated in recent decades.

Seems pretty reasonable to me! (I note this as a non-employer of other people.)  


  1. So in a period where inflation is already high and cash burn at companies is high as a result, the feds are going to change rules to that will result in companies having to increase salaries to recruit. Sounds like that is a great way to keep inflation down and companies afloat.

    I believe there is role for non-compete agreements in high tech areas like pharma especially if you have insider knowledge on processes or compounds. When "economists" want to increase pay for middle-income workers, they don't mean us. They mean the factory guys making $20/h.

    1. This is a good thing, regardless of where inflation stands. If companies want to retain talent, they should be paying people properly and providing an environment that makes someone want to stay, instead of creating a huge barrier that can tank someone's ability to make money in their selected career.

      This won't stop companies from protecting their intellectual property. It will stop them from abusing the power they can easily exert over individuals.

  2. Considering most non-competes are even enforced, I don't see a major impact from this (if it doesn't get tied up in courts for years, anyway). However, it's probably always the right call to empower employees.

  3. This would be good. I have not seen this myself in the biotech space but I have heard it seems to target folks and jobs with lower incomes and of lesser means; I have heard of some people in meat packing plants and farms making under $20 per hour having non-competes. WHY?

    I also know of an instance where the head brewer left a famous brewery (Toppling Goliath) to work for his brother's brewery (Thew Brewing) which is 105 miles away. His non-compete said he couldn't work for any brewery competitor for two years and within a 150 mile radius and so of course Toppling Goliath was suing him. There are allegedly worse non-competes in the brewing industry; Boston Beer/Sam Adams/Twisted Tea/Angry Orchard has a super complex non-compete to prevent you from working for any competitor in any state where they have satellite and contract breweries, but it's apparently only 1 year.

  4. If you’re working for any innovation company, you already sign agreements protecting the companies IP. Non competes are just punative. And the ones stopping fast food workers from working at other companies are utterly ridiculous.

  5. Non-competes are just one of the ways companies try to beat the free-rider problem. Other ways include under-training their employees, discouraging scientific publications, and narrowing R&D efforts to only those providing short-term benefit. It seems like society as a whole (and maybe most companies) would be better off accepting some free riders instead of fighting them tooth-and-nail.

  6. Noncompete agreement has its function in top management contracts but not in regular employment contracts - and it is totally getting abused in the biopharma research. The confidentiality agreements cover much the same area so non-compete just serves as a punitive measure when you decide to leave the company.

    Another ugly part of employment contracts is the non-disparagement clause, especially galling when the company does something illegal or unethical and the ex-employees are harangued by court orders from the former employer, citing confidentiality and non-disparagement and imminent harm to the company business


looks like Blogger doesn't work with anonymous comments from Chrome browsers at the moment - works in Microsoft Edge, or from Chrome with a Blogger account - sorry! CJ 3/21/20