Law Biden Moves To Restrict Noncompete Agreements, Saying They're Bad For Workers

[Lead]

Executive order this week that’s pretty big if it comes to fruition. I could see some reason behind a noncompete but I bet for every one of those, there’s ten that are petty and unnecessary for a business to force upon their employee


Biden Moves To Restrict Noncompete Agreements, Saying They're Bad For Workers
NPR

President Biden is making good on a campaign promise to curtail noncompete agreements.

As part of a sweeping executive order, Biden is asking the Federal Trade Commission to ban or limit such agreements, which restrict where you can work after leaving a job.

The move is part of a larger push from the administration to promote competition and remove barriers that stymie economic growth. The White House argues that noncompetes drive down wages by making it harder for workers to switch to better-paying jobs.

Interesting stuff in the article too about how states have handled it to this point in time, with only three doing outright bans.

 

[andnowweknow]

Well they are definitely shitty deals for workers.

 

[Prefect]

Often unenforceable but in place to discourage employees threats. My wife had a co-worker that worked in plastic and was basically working as a reporter for a year until his non-compete ran out.

At a utility I worked at, it was known the consultants wouldn't hire employees from the utility as an unwritten agreement for getting work. If you worked for the utility, your wages were basically dictated by whatever they wanted to pay and not competition unless you were willing to relocate.

 

[Yehudim]

Sounds like a great idea to someone who generally despises the government getting in between people voluntarily making deals.

 

[nostradumbass]

Yes, non compete clauses are the reason wages are stagnant. Nailed it.

 

[reveler]

do low level jobs even have non-compete clauses? like you cant work at burger king after mcdonalds because of all the "trade secrets" you learned. doesnt seem to address working class wages.

 

[Kdup]

I had a noncompete for a year when my company merged because so many people left. That has since expired and I still work here. I had a guy contact me to work for him instead but I chose to work for the big company instead of the small company. Wish I would have done the opposite.

 

[blaseblah]

Non competes are a thing in my industry. Definitely antiworker. This is a good thing.

 

[Broken arrow]

So if I discover a way of making a widget that’s more efficient then anyone else makes a widget…. I want to protect my way of making that widget so I can maintain my advantage in the widget market for as long as possible.

Why is this a bad thing?

He’s saying I’ll have to pay my workers more in order to keep them at my factory and not run over to the competition ?

Ok well what about the guy that doesn’t like me for (random reason) and quits ?

Or the guy that decides he lives closer to the other factory and would rather work there?

Or the guy that doesn’t like being on the night shift at my factory anymore?


I think protecting my methods of operating is more important then competing wages because my factory and my profits are WHY Joe Blow has a job in the first place.

 

[Lead]

do low level jobs even have non-compete clauses? like you cant work at burger king after mcdonalds because of all the "trade secrets" you learned. doesnt seem to address working class wages.

There was an example of Jimmy Johns doing it with their workers. They eventually dropped the practice. Obama suggested around that time to eliminate these type of agreements so it looks like the Biden administration picked up on it.
https://www.reuters.com/article/us-jimmyjohns-settlement-idUSKBN13W2JA

 

[method115]

So if I discover a way of making a widget that’s more efficient then anyone else makes a widget…. I want to protect my way of making that widget so I can maintain my advantage in the widget market for as long as possible.

Why is this a bad thing?

He’s saying I’ll have to pay my workers more in order to keep them at my factory and not run over to the competition ?

Ok well what about the guy that doesn’t like me for (random reason) and quits ?

Or the guy that decides he lives closer to the other factory and would rather work there?

Or the guy that doesn’t like being on the night shift at my factory anymore?


I think protecting my methods of operating is more important then competing wages because my factory and my profits are WHY Joe Blow has a job in the first place.

Get your workers to sign an NDA. What are you saying that you want to be able to stop people from working for the competition for the rest of their life? Cause that’s essentially what you would have to do. On top of that none of that stop the competition from just reaching out to the employee privately and paying them a lump sum without anyone knowing. It’s better to focus on making your widget better than the competition instead of dictating where people can work.

 

[wvboy]

So if I discover a way of making a widget that’s more efficient then anyone else makes a widget…. I want to protect my way of making that widget so I can maintain my advantage in the widget market for as long as possible.

Why is this a bad thing?

He’s saying I’ll have to pay my workers more in order to keep them at my factory and not run over to the competition ?

Ok well what about the guy that doesn’t like me for (random reason) and quits ?

Or the guy that decides he lives closer to the other factory and would rather work there?

Or the guy that doesn’t like being on the night shift at my factory anymore?


I think protecting my methods of operating is more important then competing wages because my factory and my profits are WHY Joe Blow has a job in the first place.

That's what patents are for. If you have a novel method of making a widget then that process can be patented and protected.

 

[jrams]

Get your workers to sign an NDA. What are you saying that you want to be able to stop people from working for the competition for the rest of their life? Cause that’s essentially what you would have to do. On top of that none of that stop the competition from just reaching out to the employee privately and paying them a lump sum without anyone knowing. It’s better to focus on making your widget better than the competition instead of dictating where people can work.

Exactly. NDAs and non-solicits.

I get non-competes for C-level employess and people that help plan and execute the direction of the company. I also sorta get it if it prevents an employee from leaving and starting a competing product, but even that is fuzzy. Just going to a competitor though? Stupid. Especially as companies become bigger and bigger conglomerates, it becomes dicey what is a competitor and what isn't.

 

[Rob Battisti]

HR checking in.

Non-competes are, for the most part, frivolous. The idea is that you don’t want that inside knowledge transferring directly to a competitor. The actual knowledge transfer risk is pretty low unless it’s a very senior employee.

Now, there are things like garden leave, where the exiting company actually keeps you on payroll for an extended period of time(maybe a year) and then you’re free to join another company. The idea there is your knowledge would be outdated by the time you join another company. That kind of makes sense in some ways.

My industry is big tech now and non-competes were much more prevalent in the finance industry. No one cares if a Google Engineer joins Facebook. It happens daily. I can see certain small businesses really being screwed by this though with some trade secrets.

 

[Rob Battisti]

Exactly. NDAs and non-solicits.

I get non-competes for C-level employess and people that help plan and execute the direction of the company. I also sorta get it if it prevents an employee from leaving and starting a competing product, but even that is fuzzy. Just going to a competitor though? Stupid. Especially as companies become bigger and bigger conglomerates, it becomes dicey what is a competitor and what isn't.

The enforcement of NDAs are pretty tricky but you’re basically correct. Every employee signs them where I am, and in my industry. Does that mean they adhere to them? No. Does that mean we would even know? Definitely not.

It’s more a scare tactic than anything. You’re right more so in the “don’t start a company with knowledge you leaned here” even that is difficult.

 

[panamaican]

Not a fan. I agree with everything they say about noncompetes, I just disagree with federal bans outside of contractor work where the fed is the employer. This is one of those areas where I think the states and the industries can find a better balance.

 

[panamaican]

So if I discover a way of making a widget that’s more efficient then anyone else makes a widget…. I want to protect my way of making that widget so I can maintain my advantage in the widget market for as long as possible.

Why is this a bad thing?

He’s saying I’ll have to pay my workers more in order to keep them at my factory and not run over to the competition ?

Ok well what about the guy that doesn’t like me for (random reason) and quits ?

Or the guy that decides he lives closer to the other factory and would rather work there?

Or the guy that doesn’t like being on the night shift at my factory anymore?


I think protecting my methods of operating is more important then competing wages because my factory and my profits are WHY Joe Blow has a job in the first place.

Get your widget making process patented. You don't need a noncompete for the type of protection that you're thinking about.

Noncompete are primarily used in industries where the human relationships are highly valuable. Thus when the individual leaves, the customers who have a relationship with that person might follow him to his new job. A noncompete tries to prevent that by restricting where the person can go and disincentivizing the employee from taking clients or by making it more difficult for the client to follow the employee.

Take a sales agent who has worked a specific geographic region for 10 years. He knows the people in that in region better than anyone. If he's allowed to compete within the same geographic region, he's going to take the business with him when he leaves. Companies don't want that (since they probably invested in developing the region for themselves) so they say that he has to compete far away from where he used to work. It makes sense in some contexts but it's also easily abused.

That is different from your widget process where you can just get a patent on your process and then you can enforce it against any person or company that copies it.

 

[Dream Evil]

I understand the idea behind it in some cases, but when you're working as an accountant or some other kind of back office role it's pretty pointless.

 

[Farmer Br0wn]

This is going the change WWE's business model drastically if this becomes law.

 

[jrams]

The enforcement of NDAs are pretty tricky but you’re basically correct. Every employee signs them where I am, and in my industry. Does that mean they adhere to them? No. Does that mean we would even know? Definitely not.

It’s more a scare tactic than anything. You’re right more so in the “don’t start a company with knowledge you leaned here” even that is difficult.

It's used as a big cudgel that scares companies into hiring and being dragged into a legal battle. I've never seen non-competes get litigated in practice, but I know there are a couple employees that got a 3rd party to hire them (and be compensated for it) to wait out the 1 year period as to avoid any legal shenanigans.