By Mark Carey
If you have a noncompete agreement or about to be handed one, the following information is very important. The collective “you” here covers an estimated 40-60 million employees nationwide, from executives to low wage workers in the service economy. The epidemic use of noncompete agreements has gotten out of control and too many employees have needlessly and financially suffered under this onerous default management practice. The end of this BS employment practice has now arrived!
Noncompete agreements were created by employers for employers. Employees never had a chance to negotiate these agreements. We have written extensively about this topic, Read Here. Noncompetition agreements serve no valid or reasonable purpose to protect the interests of employees, only employers. Noncompete agreements are an overreach by employers, whose interests are already protected by Confidentiality and Proprietary Information Agreements. Read More Here. Employers say it further protects their competitive advantages, trade secrets and other corporate proprietary information. That is a lie, told over and over again by the pro-employer lobby groups and the defense bar that support them. Employees are now restricted from gainful employment more than any time in this country’s work history to their financial detriment. Meanwhile, employers reap billions in unlawful restrictive trade practices that are ruining our economy, just when we are trying to dig out from this pandemic. Shame on you employers!
How did employers cause this calamity? The facts are simple to understand. No one noticed the widespread use of this default employment practice. No one noticed the financial costs to employees. Employees are not organized and politicians sought only to align themselves with the business lobby such as the Chamber of Commerce or SHRM. It is exactly this decentralized and unorganized nature of nonunionized employees, roughly a 150 million strong, that employers across the spectrum abuse and mistreat with noncompete agreements. How certain am I of this fact, because I watch the endless flow of noncompete cases come through our offices. In every case we have litigated, the employee never negotiated the noncompete agreement, had no say in the matter, was told to sign it or lose the job opportunity after they were already hired etc. These default employment practices have to stop, they are abusive and restrict trade in the U.S. economy. This is not a political issue and neither party can claim it as a weapon. Companies, large and small, run or owned by members from both political parties use noncompete agreements. Employers who force noncompete agreements on employees derive the same financial benefit, i.e. profits, at an enormous expense to individual employees.
Federal Trade Commission Has Finally Weighed In
According to the Federal Trade Commission website, “On January 9, 2020, the Federal Trade Commission held a public workshop to examine whether there is sufficient legal basis and empirical economic support to promulgate a Commission Rule that would restrict the use of noncompete clauses in employer-employee employment contracts.” Proponents of the ban on noncompete agreements seek to create a rule that noncompete agreements in the workplace are an unfair method of competition under Section 5(a) of the Federal Trade Commission Act. Obviously, litigation will ensue right up to the U.S. Supreme Court, most likely on federalism grounds where opponents of the ban will argue states have a right to make and enforce their individual state laws vs. the federal government.
President Biden Issues a Comprehensive Executive Order Banning Noncompete Agreements
On July 9, 2021, President Biden issue a comprehensive Executive Order that stated in pertinent part, “Consolidation has increased the power of corporate employers, making it harder for workers to bargain for higher wages and better work conditions. Powerful companies require workers to sign non-compete agreements that restrict their ability to change jobs… (g) To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility”
To be abundantly clear, this is not a political issue or socialistic propaganda by the Biden administration, but a return to fairness and placing a premium on a competitive workforce. As a political historian, employment activist, republican and employment litigator (employee side), I have professionally watched the nonsensical enforcement of unfair and dubious noncompete agreements for 25 years. Simply, enough is enough already! The pendulum is now swinging back to center.
According to an accompanying Fact Sheet published by the Biden Administration, “Competition in labor markets empowers workers to demand higher wages and greater dignity and respect in the workplace. One way companies stifle competition is with non-compete clauses. Roughly half of private-sector businesses require at least some employees to enter non-compete agreements, affecting some 36 to 60 million workers.”
The End of Abusive Default Management Practices
The above Executive Order banning noncompete agreements marks the beginning of the end of abusive management practices that has enveloped the nation’s workforce since the founding of this country. Other onerous default management practices such as forced arbitration, forced confidentiality of settlements, lack of employee privacy, lack of freedom of speech at work in the private sector and the employment-at-will rule, all strip employees of basic civil rights and negotiation power, and in some instances promote discrimination. Employees are indispensable to the operations and profitability of all companies, think of the Amazon warehouse in your neighborhood without line workers. How will your prime delivery get to you when you press “buy now” on the website? Employers dehumanize employees down to their human capital quotient for capitalism purposes. We should all be mindful not to break the collective backs of our nation’s workforce, and begin to recognize them for what they really mean to our economy as a whole. We need to bring more fairness and transparency to the workplace.