Employee Survival Guide® - Federal Government Moves to Ban All Noncompetition Agreements Nationwide

Episode Date: January 12, 2023

In this episode of the Employee Survival Guide, Mark discusses the following.  In an anticipated and crushing blow to all employers nationwide, the Federal Trade Commission (FTC) on January 5, 2023 issued a proposed rule that would forever ban noncompetition agreements in employment for an estimated 160 million working Americans. Employees have suffered needlessly for far too long under these oppressive and one sided employment agreements that benefit only employers.  I have spent my entire legal career voiding these default employer agreements, and on behalf of all employees Hasta La Vista Baby.  Mark goes further into the details of this proposed rule and what it means for all employees nationwide.  He provides critical and timely insight to this dramatic change in the relationship between employees and employers.  Employees Can Speak OutEmployees can weigh in too and cast their ballots in favor of the proposed rule. The FTC has opened public comment on the proposed rule for 60 days and I encourage all employees and executives to send in their stories about how their noncompete agreements ruined their employment prospects and wages. If you enjoyed this episode of the Employee Survival Guide please like us on Facebook, Twitter and LinkedIn. We would really appreciate if you could leave a review of this podcast on your favorite podcast player such as Apple Podcasts. Leaving a review will inform other listeners you found the content on this podcast is important in the area of employment law in the United States. For more information, please contact our employment attorneys at Carey & Associates, P.C. at 203-255-4150, www.capclaw.com.

Hey, it's Mark here, and welcome to the next edition of the Employee Survival Guide, where I tell you, as always, what your employer does definitely not want you to know about, and a lot more. Hey, it's Mark here, and welcome to the next edition of the Employee Survival Guide. Today's topic is going to be how the federal government banned non-competition agreements for all employees nationwide. In an anticipated and crushing blow to all employers nationwide, the Federal Trade Commission on January 5, 2023, issued a proposed rule that would forever ban non-competition agreements in employment for an estimated 160 million working Americans.

Employees have suffered needlessly for far too long under these oppressive and one-sided employment agreements that benefit only employers. I have spent my entire legal career voiding these default employer agreements and on behalf of all employees, hasta la vista, baby. But employees and executives will need to be patient as lobbyists and pro-employer groups will mount an extensive and legal campaign to overturn the proposed rule, and you should expect this fight to go all the way to U.S. Supreme Court. This battle is about corporate profit and greed, nothing more and nothing less. Employees can weigh into and cast their balance in favor of the proposed rule. The FTC has opened the public comment section on their website on the proposed

rule for 60 days, and I encourage all employees and executives to send in their stories about how their non-compete agreements ruin their employment prospects and wages. ruin their employment prospects and wages. According to the FTC, an estimated 30 million employees are currently bound by a non-competition agreement. Quote, a non-compete clause is a contractual term between an employer and a worker that blocks the worker from working for a competing employer or starting competing businesses, typically within a certain geographic area and period of time after the worker's employment ends, end quote. The FTC's rationale offered in support of this gargantuan leap forward for the rights of American employees is, quote,

non-compete clauses prevent workers from leaving jobs and decrease competition for workers. They lower wages for both workers who are subject to them as well as workers who are not, end quote. The FTC estimates a ban on non-competition agreements would raise employee wages to $250 billion to $296 billion per year. While at the same time concurrently stimulating the economy and providing an increased tax revenue for the U.S. Treasury. I also estimate that employees and employers would save more than a billion dollars annually on legal fees, fighting for and against enforcement of non-competition agreements in courts. I derived this number from the roughly 4,000 members of the National Employment Lawyers Association, which I'm a part of, and assuming that each lawyer handled about five cases per year. And it's a very conservative estimate, but you get the picture. Who in their right mind would oppose this proposed rule to ban non-compete agreements?

Employers nationwide, both small and large. Employers nationwide, both small and large. However, no fair-minded employee or executive will stare you in the eye and convince you that this new proposed ban on non-competes is wrong for them individually and wrong for the country. I say this because I represent both employees and executives. I have never had a client state the non-compete agreement was something they had asked for, nor something they ever wanted. A non-compete, in its essence, seeks to deny employment income to employees and in the executive situation forces a forfeiture of incentive compensation she has rightly and honestly earned through her tenure of service to the company. Now, the proposed rule. The rule defines unfair competition as follows. It is unfair method of competition for an employer to enter into or attempt to enter into a non-competed 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 enforceablecompete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause, end quote. The rule goes on to further state any existing non-compete agreements will be voided as of the effective date of the proposed rule, and employers must notify existing and previous employees within 45 days that the non-compete agreements they had are no longer valid. The proposed rule would apply to a wide range of class of employees,

employees and independent contractors, externs, interns, volunteers, apprentice, and sole proprietor, except the rule doesn't apply to franchisees in the context of the franchisee and franchisor relationship, but not including the workers who work for the franchisor, which think about, look, McDonald's and Burger King. Non-compete agreements are created by employers for employers. Employees never had a real chance to negotiate these agreements. We have written extensively about this topic before on our website. Non-competition agreements serve no valid reasonable purpose to protect the interests of employees, only employers. Non-competition agreements are an overreach for employers

by employers whose interests are already protected by confidentiality and proprietary information agreements they have employees sign at the start of their employment. and proprietary information agreements they have employees sign at the start of their employment. Employers say that non-competition agreements protect the competitive advantage they have created, their trade secrets, and their corporate proprietary information. This is a lie, told to you repeatedly by the pro-employer lobby groups and the defense bar that support them. Employees are now restricted from gainful employment more than at any time in the country's work history to their financial detriment. How did employers cause this calamity? The facts are simple to

understand. No one noticed. No one noticed the widespread use of the default employment practices covering 30 million employees, according to the FTC. No one noticed the financial cost to employees until today. Employees are not organized and politicians sought only to align themselves with a pro-business lobby such as the Chamber of Commerce and the Society for Human Resource Management. It is exactly this decentralized and unorganized nature of non-unionized employees, roughly 160 million strong, that employers across the spectrum abuse and mistreat employees and executives alike with non-competition agreements. How certain am I of this fact? Because I watch the endless flow of non-competition cases come through our offices. In each case we have litigated, the employee never negotiated the non-compete agreement, had no say in the matter, was told to sign the sham deal or lose the job opportunity even while they were still working.

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 of both parties, use non-competition agreements. Employers who force non-compete agreements on employees derive the same financial benefit, which is profit and competitive control of the labor market at an enormous expense to individual employees. That's a big deal, folks. The FTC proposed rule ban on non-competition agreements marks the beginning of the end of abusive management practices that has enveloped the nation's workforce since the founding of this country. Yes, that is exactly how long employers have used non-competition agreements. Other onerous default management practices such as forced arbitration,

which is now prohibited in sex discrimination cases, forced confidentiality of settlements, lack of employee privacy, lack of freedom of speech at work in the private sector, and the ubiquitous employment at will rule. All strip employees of basic civil rights and negotiation power, and in some instances create or promote discrimination. Employees are indispensable to the operations of profitability of all companies, both private and public. Employers dehumanize employees down to their human capital quotient for capitalism purposes.

We should all be more mindful not to break the collective backs of our nation's workforce and recognize them for what they really mean to our economy as a whole. Without them, there are no companies. Without them, there is no economy. We need to bring more fairness and transparency to the workplace. Thank you for listening, and I'll talk to you next time. If you like the Employee Survival Guide, I'd really encourage you to leave a review. We try really hard to produce information to you that's informative, that's timely, that you

can actually use and solve problems on your own and at your employment. So if you'd like to leave a review anywhere you listen to our podcast, please do so. And leave five stars because anything less than five is really not as good, right? I'll keep it up. I'll keep the standards up. I'll keep the information flowing at you. If you'd like to send me an email and ask me a question, I'll keep it up. I'll keep the standards up. I'll keep the information flowing at you. If you'd like to send me an email and ask me a question, I'll actually review it and post it on there. You can send it to MCARUY at CAPCLaw.com. That's CAPCLaw.com.