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 It would also require employers to repeal existing non-compete provisions and actively notify workers that they are no longer in effect.”
Expect businesses using these agreements to attack and file lawsuits against the decision. But given that the FTC’s mission is to “protect the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research and education,” it should resist the challenges.
President Biden praised the move during his first Cabinet meeting this year, expressing outrage at a practice that effectively says, “you work for Subway and you can’t cross the street and go to Jimmy John’s and get a 20-cent raise.” He added: “What the hell is it but a pay cut? And so these agreements block millions of retail workers, construction workers and other workers from taking better jobs, better pay and benefits in the same field.”
The rule does not prohibit nondisclosure agreements that would prevent an employee from sharing confidential measures or trade secrets with an employer, unless it “effectively prevents the employee from working in the same field after termination of employment with the employer.” Nor does it affect the non-competitiveness that accompanies the sale of a business.
Yet this relates to a fundamental principle of free-market capitalism: the right to a contract that both employer and employee can agree to. As Sandeep Vaheesan of the Open Markets Institute wrote for Bloomberg Lion in 2021, “non-competes lock workers into place and rob them of an important source of power: the freedom to find new employment or start a business within their community. Even when employers do not or cannot enforce non-compete clauses in court, they prevent worker mobility because workers fear being sued.” Vahesan 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 a bad boss and pay are, for most people, preferable to no pay.”
So all those free-market Republicans extolling the benefits of capitalism should be included, right? Don’t count on it. Republicans are captives of corporate donors and beholden to corporate lobbyists, so expect them to come up with plenty of excuses to oppose action. But if they are serious about becoming a populist party, they have every reason to accept the proposal.
This is not the first move for competition by progressive favorite Kahn, an antitrust guru and fierce antitrust scholar who has focused on Big Tech and Amazon in particular. (Amazon founder Jeff Bezos owns The Post.) She vowed to shake up an agency not known for aggressive or innovative actions.
Just weeks after being sworn in two years ago, she revoked a 2015 policy that limited what anticompetitive practices the FTC could challenge. And last year, she sued to block Matt’s acquisition of a virtual reality company, defying antitrust orthodoxy. The New York Times reported: “At the heart of the FTC’s suit is the idea that regulators can enforce antitrust law without waiting for the market to mature to the point where it’s clear which companies have the most power. The FTC said such early action was justified because Meta’s deal would likely eliminate competition in the fledgling virtual reality market.
Shaking up a sleepy, cautious agency is no easy task. An intellectually sophisticated president and staunch opponent of unfair business practices is exactly what the FTC needed. For her aggressive advocacy of competition and defense of workers’ freedom, we can say well done, Ms. Kahn.