As House Republicans showed the nation how completely unable to govern they are or will be, failing to elect a speaker for the seventh vote in three days, the Biden administration showed that there are things it can keep getting done. Big things, even.
The Federal Trade Commission (FTC) issued a proposal Thursday to ban employers from imposing noncompete clauses on workers, preventing them from moving to a competing business or even starting their own business after leaving a job. If you’re reading that and imagining that these apply to high-level developers or researchers in deep with proprietary technology, think again. One in 5 workers in the U.S. is subject to a noncompete clause, according to the FTC, coming to around 30 million workers. That’s not a legitimate business practice to protect trade secrets. It’s a strategy to control workers.
In fact, according to one study, 1 in 6 food service or preparation workers is subject to a noncompete. Most notoriously, sandwich chain Jimmy John's required that its sandwich makers sign the agreements for years, preventing workers from going not just to, say, Subway, but to any restaurant or business within 3 miles of any Jimmy John’s that did 10% or more of their business in sandwiches or wraps. Jimmy John’s abandoned that requirement in 2016 following a settlement with the New York attorney general’s office. But the practice remains common in the food service industry, and employers often enforce or attempt to enforce them against workers who leave—while they make an unknown number of workers feel stuck in jobs they would like to leave.
“After Chicago's Grace, a three-star fine dining restaurant, abruptly closed in 2018, its chef and general manager sued the restaurant's owner over a non-compete clause that barred them from opening a new restaurant in the area,” Food & Wine noted following Biden’s executive order on noncompetes. “Last year, a Washington, D.C., restaurant owner sued his former chef for allegedly violating a non-compete after accepting a position with a competitor. The suit was eventually settled with no money changing hands.”
The Counter offered more examples: “Other notable cases include a 2018 lawsuit filed by a craft brewery against a former employee, who quit to take on a similar role at another company 100 miles away, as well as multiple instances of chefs being forced to wait out lengthy noncompete periods before they could resume working at restaurants.”
Noncompete agreements are also a significant issue for workers at beauty salons, with the agreements expected of hairstylists and manicurists. Nurses have found their lives upended by noncompete clauses. These are all over the place, and in businesses where the only real justification is the illegitimate one: to keep workers bound to an employer when they want to leave.
That’s what the FTC’s proposal would address, banning future noncompete clauses and requiring existing ones to be rolled back. Here’s the core of the proposal: “It is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.”
Workers lose more than $250 billion in potential pay every year, the FTC says, because of noncompete clauses limiting their options. The proposed rule would change that.
“Noncompetes are basically locking up workers, which means that they’re not able to match with the best jobs for them,” FTC Chair Lina Khan told reporters on Wednesday. “If this rule were to be finalized and go into effect … [it] would force employers to compete more vigorously over workers in ways that should lead to higher wages and improved working conditions, basically injecting competition into the labor market.”
The proposal faces a long process and almost certain litigation before it can go into effect, but the fact that, well over a year after Biden’s executive order calling on the FTC to draft such a rule, the agency came up with such a strong and unequivocal proposal is an important step.
