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noncompete clauses
Trump-Appointed Judge Strikes Down FTC Ban on Noncompete Agreements
"Thirty million workers who were trapped by these agreements will now stay trapped thanks to this ruling," an expert said.
Aug 21, 2024
A U.S. District Court judge in Texas on Tuesday struck down a Federal Trade Commission ban on noncompete agreements that was set to go into effect nationwide in September, drawing condemnation from workers' rights advocates who supported the ban.
Judge Ada Brown, who was appointed to the federal bench by then-President Donald Trump in 2019, ruled that the FTC didn't have the authority to issue substantive rules such as the noncompete ban, which was issued following a 3-2 vote of the agency's commissioners in April.
Noncompetes bar workers from getting jobs with competitors or leaving to start their own company. Commissioners in the majority, including FTC Chair Lina Khan, said the agreements suppress wages, stifle entrepreneurship, and distort labor markets. Advocates have long argued that the agreements are anti-worker.
The FTC has estimated that 30 million U.S. workers are subject to noncompete agreements. Had the rule gone into effect—voiding most existing agreements and prohibiting new ones—workers would have collectively increased their earnings by hundreds of billions of dollars over the next decade, the agency said.
"We are disappointed by Judge Brown's decision and will keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation, and depress wages," Victoria Graham, an FTC spokesperson, toldThe Washington Post.
Bharat Ramamurti, a former deputy director of the National Economic Council who's now a senior adviser at the American Economic Liberties Project (AELP), an anti-monopoly advocacy group, said on social media that "30 million workers who were trapped by these agreements will now stay trapped thanks to this ruling."
30 million workers who were trapped by these agreements will now stay trapped thanks to this ruling. The FTC estimated that banning noncompetes would empower workers and raise wages by nearly $200 billion over the next decade, which is why big business lobbyists fought it. https://t.co/G79l9l5UWs
— Bharat Ramamurti (@BharatRamamurti) August 20, 2024
Ryan LLC, a tax services firm based in Dallas, sued to block the FTC regulation as soon as it was issued in April. The U.S. Chamber of Commerce and the Business Roundtable later joined the case, which is in a jurisdiction friendly to their interests. If the case is appealed, which Graham said the FTC is "seriously considering," it would go to the U.S. Court of Appeals for the 5th Circuit—the most right-wing, pro-business appeals court in the country.
Tuesday's ruling, though momentous, didn't come as a surprise. Judge Brown signaled her intent to side with the plaintiffs last month when she partially blocked the FTC rule and placed a temporary injunction on it.
Similar cases involving the FTC noncompete ban have recently appeared in federal courts in Florida and Pennsylvania, with different and less consequential outcomes, raising the possibility that the matter will be taken up by the U.S. Supreme Court.
The Supreme Court's right-wing majority would make a ruling favorable to the FTC unlikely, so congressional action could be necessary to institute a ban on noncompete clauses, experts say.
Banning noncompetes is popular among the general public and has some bipartisan support, with a number of prominent Republicans having come out in favor of a ban or narrower reforms, such as prohibiting such agreements for low-wage workers.
Khan, an antitrust leader beloved of progressives, received 21 confirmation votes from Republicans in 2021, and parts of her agenda are supported by the GOP.
Khan is far from universally loved among Democrats. She's recently been the target of Democratic megadonors such as LinkedIn founder Reid Hoffman, who's pushed Vice President Kamala Harris, the Democratic presidential nominee, to sack Khan if elected. However, even Hoffman has indicated support for the noncompete ban.
HuffPost reporter Daniel Marans on Saturday wrote that the noncompete ban was "Khan's most ambitious initiative" and cited expert opinion that even if the rule didn't hold up, it was part of a broader push that could ultimately lead to reform.
"Even if the FTC rule is overturned, there are still many other efforts afoot to undermine the use of these agreements," Lee Hepner, senior legal counsel at AELP, told Marans. "It's a multi-pronged strategy."
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Trump Judge Partially Blocks FTC Ban on Anti-Worker Noncompete Clauses
"We will keep fighting to free hardworking Americans from unlawful noncompetes," the agency said in response to the decision.
Jul 04, 2024
A Trump-appointed federal judge on Wednesday partially blocked a Federal Trade Commission rule banning most noncompete clauses, ubiquitous anti-worker agreements that prevent employees from moving to or starting their own competing businesses.
Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a preliminary ruling preventing the ban from taking effect against the handful of plaintiffs that sued the FTC over the rule mere hours after it was finalized in April. The plaintiffs include the tax service firm Ryan LLC and the U.S. Chamber of Commerce, the nation's largest corporate lobbying organization.
Researchers at the Revolving Door Project noted Wednesday that Ryan LLC was "represented by [former President Donald] Trump's Labor Secretary, Eugene Scalia, via BigLaw firm Gibson Dunn."
Watchdogs accused the U.S. Chamber, which celebrated Wednesday's decision, of "judge-shopping," a tactic the organization frequently uses to secure favorable legal outcomes. District courts in Texas fall under the purview of the 5th Circuit Court of Appeals, which is dominated by right-wing extremists.
In her Wednesday decision, Brown did not immediately grant the plaintiffs' request for a nationwide injunction against the ban on noncompetes. But the judge signaled she would likely block the rule in its entirety with her final decision in the case on August 30—just days before the ban's scheduled implementation date.
"The court concludes the commission has exceeded its statutory authority in promulgating the noncompete rule, and thus plaintiffs are likely to succeed on the merits," Brown wrote in her 33-page decision.
"The need for judicial reform in Congress has never been more clear as far-right 5th Circuit territory judges have effectively put up a giant neon sign, 'Corporations, Please Sue Here.'"
A spokesperson for the FTC said in response to the ruling that the agency stands by its "clear authority, supported by statute and precedent, to issue this rule."
"We will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit economic growth, trap workers, and undermine Americans' economic liberty," the spokesperson added.
The FTC, led by antitrust trailblazer Lina Khan, estimates that roughly 30 million U.S. workers are bound by noncompete agreements that restrict their ability to switch jobs in pursuit of higher wages and better benefits. The commission believes its ban on noncompetes would result in up to $488 billion in wage increases for U.S. workers collectively over the next decade.
Progressive advocacy groups cast Wednesday's decision as the latest attack on workers—and gift to corporations—by a Trump-appointed judge.
"By halting the noncompetes ban, this court is standing in the way of real gains for workers again," said Emily Peterson-Cassin, director of corporate power at Demand Progress. "With the decision overturning Chevron earlier this week, it's a one-two punch against everyday people."
Tony Carrk, executive director of Accountable.US, said in a statement that "the industry-funded U.S. Chamber continues to cost everyday Americans a ton of money with its suing spree against the Biden administration crackdowns on corporate greed, junk fees, and anti-worker barriers."
"The U.S. Chamber's lawsuit holding up the administration's credit card late fee rule is already costing Americans $27 million a day —and now this latest lawsuit could slam the door shut for millions of American workers to begin pursuing better opportunities," said Carrk. "Noncompete clauses could force employees to endure low wages and poor working conditions as the rule drags through the courts. The big bank and Wall Street CEOs on the U.S. Chamber's board have gotten a huge return on their investment while American workers pay the price."
"The need for judicial reform in Congress has never been more clear," Carrk added, "as far-right 5th Circuit territory judges have effectively put up a giant neon sign, 'Corporations, Please Sue Here.'"
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The FTC’s New Ban on ‘Noncompetes’ Helps Workers Reclaim Their Power
By restricting employees from joining competitors or starting their own ventures, noncompetes impede not only individual career and wage growth but also the dynamism of the broader economy.
Apr 29, 2024
Changing jobs can often be the best way to get a raise. But employers frequently force workers to sign “noncompete clauses,” contract stipulations that make it harder for workers to move to better jobs and artificially depress wages.
That will change later this year.
The Federal Trade Commission recently issued a new rule declaring that most noncompete clauses in employment contracts are unfair. The new rule bans employers from requiring workers to sign these agreements and prohibits the enforcement of existing “noncompetes” for workers other than senior executives.
The only leverage non-union workers have with their employers is their ability to quit and take a job somewhere else. But employers have been using noncompete agreements to cut that source of worker power off at the knees.
This is an important step toward fostering fair competition and empowering workers.
Noncompete agreements are employment provisions that ban workers at one company from working for, or starting, a competing business within a certain period of time after leaving a job. They’re ubiquitous. The Economic Policy Institute finds that more than one out of every four private-sector workers are required to sign one as a condition of employment.
These agreements aren’t limited to high-wage workers in knowledge-sensitive occupations and industries. More than a quarter (29%) of private workplaces with an average wage of less than $13.00 per hour used noncompete agreements for all their workers, according to one survey.
The only leverage non-union workers have with their employers is their ability to quit and take a job somewhere else. But employers have been using noncompete agreements to cut that source of worker power off at the knees.
The research on the economic impact of noncompetes is clear: By keeping workers from finding better opportunities, they reduce wages and reduce the formation of new firms. In other words, by restricting employees from joining competitors or starting their own ventures, noncompetes impede not only individual career and wage growth but also the dynamism of the broader economy.
Employers don’t need noncompetes to protect their trade secrets, as they sometimes claim. Intellectual property law already provides significant legal protections for trade secrets. Noncompetes have been unenforceable in California for decades without keeping that state from becoming a leader in tech innovation.
Further, noncompetes are often bundled with other anti-competitive employer practices that harm workers.
For instance, over half of firms surveyed that required noncompetes for at least some of their employees also required workers to agree to mandatory arbitration, rather than the court system, to resolve disputes with their employers. This underscores that the purpose of noncompete agreements is to restrict employees’ options, not protect trade secrets.
Noncompetes are about reducing competition, full stop. It’s in their name.
Noncompetes are bad for workers, bad for consumers, and bad for the broader economy. By banning them, the FTC’s rule will help raise wages for workers and take an important step toward creating an economy that is not only strong but also works for working people.
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