Big business plans to block Biden’s ban on noncompete agreements

Its champions The “free market” is frantically lobbying to block the Federal Trade Commission’s impending ban on noncompete agreements, which prevent workers from seeking better-paying jobs or starting new businesses.

The US Chamber of Commerce, the nation’s largest business lobby, bills itself as the “voice for competition in the marketplace,” a principle it says is critical to innovation and dynamism in the economy. Despite his rhetoric, the chamber is agitating against a major reform proposed by the FTC to free workers from so-called non-compete clauses. Anti-competitiveness has become rampant in large companies, forcing many workers to sign on as a condition of employment. Today, nearly 1 in 5 American workers—about 30 million people—is bound by a noncompete.

“This is just another example where support for the ‘free market’ is effectively a Calvinball for business groups,” Dean Baker, an economist at the Center for Economic and Policy Research, told The Intercept. “They’re perfectly happy to effectively redefine the free market when it suits their interests.”

Indeed, this phenomenon of corporations – agitating for the “principle” of “free markets” but actually opposing functioning markets – was recently pointed out by an anonymous commenter on the FTC’s website. The poster, in support of the proposed FTC rule, wrote, “I find it ironic that those who support non-competition clauses also claim to support free markets/capitalism, which supposedly thrives out of competition.”

It should come as no surprise, however. In Adam Smith’s “The Wealth of Nations,” published in 1776, he noted that “it is always the interest of the greatest “merchants and principal manufacturers” to widen the market and restrict competition.” Therefore, arguments of such public interest are listened to “with the most suspicious attention.” should because they “generally have an interest in deceiving and even oppressing the public.”

Pro-business groups contend that the FTC lacks the legal authority to issue such bans. “Efforts to ban non-competition clauses in all employment situations overturn well-established state laws that have long regulated their use and ignore the fact that, when used appropriately, non-competition agreements are an important tool to encourage innovation and preserve competition. ,” US Chamber of Commerce Senior Vice President for International Regulatory Affairs and Antitrust Sean Heather said in a statement. (The latter argument ignores the variety of other laws that exist to protect business proprietary information.)

On Tuesday, the chamber and a coalition representing hundreds of employers sent a letter to the FTC, requesting an extension of the comment period to give industry groups more time to object. The FTC announced the rule on January 5. After a 90-day public comment period, the FTC may decide to revise or withdraw the rule. If the agency proceeds with a non-compete ban, the rule becomes effective 180 days after publication of the final regulation.

The chamber-led industry alliance includes the American Hospital Association, the American Bankers Association, the National Restaurant Association and dozens of other employer-led groups that represent America’s largest corporations.

The Chamber has threatened a lawsuit to block the FTC rule. “There’s no need to panic,” Jackson Lewis, one of the nation’s most aggressively anti-union law firms that advises businesses, wrote in a Jan. 10 special report: “It’s still early in the process. […] If the final rule is issued, it will face significant and substantial legal challenges.”

its spread So-called non-compete clauses have flooded the economy — a phenomenon that has also become common for fast-food workers, clerks and low-level hospital employees. In 2016, a Treasury Department report found that 15 percent of workers without a four-year college degree are subject to non-compete agreements, even though some such workers hold trade secrets. This clause generally prevents employees from taking a similar job elsewhere or starting a new business in the future.

“It is outrageous that these companies want the right not to compete with each other in an open market for workers.”

These restrictions have raised alarm among economists and activist advocates. The Economic Policy Institute found that noncompete clauses fueled rising inequality by reducing “labor market fluidity” — that is, workers’ ability to change jobs. One of the primary ways a non-union worker can bargain for a better wage is to threaten to leave for a better-paying position elsewhere, a dynamic that is eliminated by non-compete clauses.

“It’s outrageous that these companies want the right not to compete with each other in an open market for workers,” City University of New York economist JW Mason told The Intercept. “They don’t want to pay what people’s labor would be worth in a competitive market.”

The FTC’s proposal follows a July executive order by President Joe Biden directing the agency “to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to prevent the unfair use of non-competition clauses and other clauses or agreements that unfairly restrict worker mobility.” can do.”

The appointment of FTC Chair Lina Khan by Sen. Progressives like Elizabeth Warren, D-Mass., heralded it as “tremendous news” and “a huge opportunity to make big, structural changes by revitalizing antitrust enforcement and the antitrust fight.” Chosen to shake up a company seen by progressives as too soft on business, Khan has challenged decades of antitrust laws, arguing Amazon has a monopoly case.

And the rule is popular, enjoying the support of two-thirds of currently employed people, according to a Jan. 6 poll by Ipsos. Lawmakers from both parties have introduced bills that sharply limit the use of such clauses.

“Speak up if you have something to say and file a comment,” Fisher Phillips instructs clients on a frequently asked questions page. “If you would like guidance on this process, please coordinate with your Fisher Phillips attorney.” Fisher Phillips has conducted training with the Chamber of Commerce in the past guiding employers on non-competes.

A recurring theme in the public comments is that medical professionals express frustration with the lack of competition they are unable to employ. “The noncompete clause forces doctors to move out of state if they [are] want to change jobs and not put them behind a job in the first place,” wrote Dr. Shiraz Rahim, a physician at Rush University Medical Center in Chicago whose responsibilities include recruiting other doctors. “This has contributed to the doctor shortage across our system and made it impossible to recruit new doctors to our area.”

“I previously worked in an underserved area of ​​Ohio where patients had to wait over 6 months to see a medical specialist. My hospital job requires a non-compete of 20 miles,” wrote Florida physician Kathryn Lu. “This non-compete forces physicians to leave the community and their patients if they want to leave their jobs. I had to move to another state with my family.”

In another public comment, Dr. Cordelia Ariel Nason, director of anesthesiology at Northridge Surgical Suites in Nashua, New Hampshire, described the dire consequences of the noncompetes, which she called “tips the balance in favor of the big companies” that own hospitals and other medical practices. Opportunity – Advantage.

“These large corporations then recruit the doctors, forcing them to sign non-compete agreements that effectively limit them from working at the facilities where they devote their lives,” Nason wrote. “And then if the working conditions under the company deteriorate or the company cancels their own contract with the medical facility or the medical facility cancels the contract with the company, the doctor is then unable to work at that facility for himself or another company with more favorable conditions.”

some distance Arguments against noncompetes that bother to go beyond procedural questions about the FTC’s authority focus on the idea that noncompetes promote innovation by preventing workers from leaving jobs and taking trade secrets with them. Indeed, employers often argue that non-compete clauses are necessary to protect confidential information such as marketing strategies or pricing plans. Fear of losing a competitive edge from inside information drives the proliferation of such employment contracts.

But advocates note that the FTC ban on non-compete clauses, like similar bans enacted in recent years in Maryland and California, does not violate existing laws prohibiting the theft of trade secrets and other proprietary information. Employers may still require confidentiality agreements and other restrictive covenants in employment contracts, while allowing former employees to leave and work for competing companies.

“Many states, particularly California, have long prohibited non-competes; They seem to be doing well,” said economist Baker. “California’s claims of innovation are quite frankly meaningless given its dominance of the technology.”

Another argument advanced by advocates is that non-competes encourage employers to invest in training workers, since they do not risk becoming competitors. “There may be some impact on training, but the benefits in the form of higher wages and more frequent startups almost certainly offset that,” Baker said.

Lobbying records show corporate interests are gearing up for the fight. The HR Policy Association, which represents major employers including McDonald’s Corp. and Johnson & Johnson, has closely watched reform efforts around noncompete clauses.

The National Association of Manufacturers, which represents Toyota, Exxon Mobil, BNSF and other large employers, has reported lobbying the FTC and other federal agencies on antitrust issues.

Opposition extends to the media. The National Newspaper Association, which represents community newspapers across America, signed on to the letter the chamber sent earlier this week. News outlets, like virtually every other industry, have increasingly adopted non-compete clauses in employment contracts, not only for top editors and executives, but also for lower-level journalists and other employees.

throughout history In capitalism, the aim of employers – whatever their rhetoric – has always been to reduce competition by various means in order to drive down wages. In the 1800s, as the British Empire prepared to abolish slavery on its estates, British officials devised plans to prevent former slaves from having the option of buying their own land to farm—and therefore be in a position to demand better wages. It was, in a sense, the uncontested genre of the day.

More recently, in Silicon Valley, Adobe, Apple, Google, and Intel have individually agreed not to poach workers from each other with higher salary offers. As the New York Times put it in 2015, they “conspired against their own employees.” The four companies eventually settled a lawsuit for $415 million. Other companies, including eBay, were also involved in the collusion. (eBay was founded by Pierre Omidier, who also founded First Look Media, whose nonprofit arm The Intercept was originally a part of.)

At least one lobbying group suggests there is another way to retain workers. The American Optometric Association, which represents optometrists, sent an update to members surrounding the FTC proposal. The memo quotes Sharon Markowitz, an attorney, who recommended that doctors consider speaking with a lawyer and submitting an FTC comment opposing the rule.

If all else fails, Markowitz said, one way to potentially circumvent noncompete clauses is to improve employee loyalty by “raising wages.”