The proposed rule is far-reaching. The FTC explains: “The proposed rule would apply to independent contractors and anyone who works for an employer, whether paid or unpaid. It would also require employers to terminate existing non-compete agreements and actively inform workers that they are no longer in effect.”
Expect companies making use of these deals to attack you and file lawsuits against the decision. But since the mission of the FTC is to “protect the public from deceptive or unfair business practices and unfair methods of competition through law enforcement, advocacy, investigation, and education,” must meet the challenges.
President Biden touted the move during his first Cabinet meeting this year, expressing exasperation over a practice that effectively He says, “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.” He added: “What the hell is all that about besides keeping wages low? And therefore these agreements prevent millions of retail workers, construction workers and other workers from getting better jobs, getting better wages and benefits in the same field.”
The rule does not prevent non-disclosure agreements that prevents an employee from sharing confidential measures or trade secrets with an employer, unless it “effectively prevents the worker from working in the same field after the termination of the worker’s employment with the employer.” It also does not affect non-compete agreements that accompany the sale of a business.
However, this gets to a fundamental principle of free market capitalism: the right to contract that both an employer and an employee can accept. Like Sandeep Vaheesan of the Open Markets Institute wrote for Bloomberg Law in 2021, “Non-competition locks workers in place and robs them of an important source of power: the freedom to find a new job or start a business in their line of work in their community. Even when employers do not or cannot enforce non-compete clauses in court, they discourage worker mobility because workers fear being sued.” Vahessan continued: “Research has found that non-compete clauses reduce wages and wage growth over time. They can also trap workers in abusive and discriminatory work environments because, for most people, a bad boss and a paycheck is better than no paycheck.”
So all those free-market Republicans touting the benefits of capitalism should agree, right? Don’t count on it. Republicans are captives of corporate donors and beholden to corporate lobbyists, so expect them to come up with any number of excuses to oppose the action. But if they are serious about becoming a populist party, they have every reason to accept the proposal.
This is not the first step in favor of the competition of progressive favorite Kahn, an antitrust guru and fierce antitrust scholar who has taken on Big Tech and Amazon in particular. (Amazon founder Jeff Bezos owns The Post.) He vowed to shake up an agency not known for his aggressive or innovative actions.
Just weeks after taking the oath two years ago, he struck down a 2015 policy that restricted anticompetitive practices that the FTC could challenge. And last year, he filed a lawsuit to block Meta’s acquisition of a virtual reality company, defying antitrust orthodoxy. The New York Times reported: “At the heart of the FTC’s lawsuit is the idea that regulators can enforce antitrust law without waiting for the market to mature to the point where it becomes clear which companies have the most power. The FTC said such early action was justified because the Meta settlement would likely eliminate competition in the young virtual reality market.
Shaking up a dormant and cautious agency is no easy task. An intellectually sophisticated president and dogged opponent of unfair trade practices is just what the FTC needed. For your aggressive defense of competition and defense of workers’ freedom, we can say well done, Ms. Kahn.