Yesterday, the Federal Trade Commission proposed a ban on non-compete agreements that prevent workers from switching jobs. This move could boost wages by $300 billion a year, or $2000 per worker.
Matt, you’re doing great work, and so is Lina Kahn! This is such exciting news!
I avoided signing a non-compete for a summer internship in college simply by saying “my lawyer told me not to sign that”, and they hired me anyway. Incredibly, that contract was for a $9 an hour job at a small chemical testing company that tested feed and grain. They had all their employees sign the contract, and I assume they relied on ignorance and never had any pushback. Labor needs protection from rackets like this.
While I just left my employer last week for another industry, they have a veritable choke-hold on a majority of their employees between their expansive non-compete and forced arbitration agreements. And they're no small fish, with over 13,000 employees in the States.
I happen to live in a state that does uphold non-competes and this particular industry (Healthcare IT) is an insular one, with few other options and little real competition due to the massive friction in changing systems (also, the employer enforces the non-compete by restricting necessary system access if you went to work for a customer). The employer has homegrown everything and doesn't engage with the larger tech community, resulting in their employees having little direct overlap with respect to tech/coding platforms.
Given their now two year non-compete and dominance in the US market, their customer support staff can't leave. Two years out of the industry is career suicide. Yet any of them would be wildly overqualified for the customer side (hospital IT staff), where they would receive more pay and much more generous PTO.
It's clear action from the FTC would dismantle this egregious imbalance of power. This company would be forced to negotiate with their employees, something they pathologically opposed to (see their Supreme Court cases...).
This is only one of many, many areas in which employer power has expanded to a gross extent. In this particular case, if their employee base was able to be mobile, many healthcare systems around the country would have access to great talent, while the company itself would need to raise its standard of care for the employee. I have dry eyes for the company's 'loss'; arguably, they would have a more dedicated employee base by securing employees through being competitive in the workplace, not through punitive, draconian contracts.
In Texas, Nurse Practitioners are basically indentured servants. Although they hold Master's and many have Doctorates, they cannot work in Texas unless they have an annual contract signed by a physician. What does the physician do in ruturn? A monthly phone call is the minimal requirement. The physician never has to visit the NP workplace or do anything else. Direct supervision of NP's ended in 2013, yet the Texas Legislature (Texas Medical Association minions) did not eliminate the contract (AKA delegation agreement). Why? Because many physicians charge, some up to nearly $100,000 for an annual agreement. Many physicians are kind hearted and charge nothing. Also, they can control the "competition". The sad part is now nearly 80% of physicians are employed, and their employers prohibit them from delegating to anyone outside their clinics or facilities. This creates even more barriers to access to care for especially rural and poor people. Does it seem right that one profession is able to control another profession? Texas is one of nine states left in the U.S. in which the NPs are endentured. Most of other states got rid of those ridiculous requirements years ago.
The U.S. Chamber of Commerce calling the action ‘blatantly illegal’ again confirms they stand for the market power of monopolistic corporations and against any effort that benefits the working class. It is time for labor to get their fair share of America’s wealth and stop the transfer of wealth from the working class to the
This is fantastic but it barely scratches the surface. Employer based health care has the same effect on many many more employees by reducing their mobility and the suppression of unions prevents effective bargaining at the same job. And don't forget, a captive labor market is a tool that BIG business uses against small companies.
Even Jimmy John's, a sub sandwich chain used non-competes on its workers. These folks make barely over minimum wage and companies are going to claim that their sandwich-making skills are so unique that moving to another company is going to hurt Jimmy John's. It's so absurd on its face as to be laughable, so it's great that this travesty is coming to an end.
When I left H & R Block to establish my own tax preparation firm I was subject to a one year non-compete, which I felt was not unreasonable as my clients were loyal to me and not to Block and taking them with me would have harmed the firm. So, I refrained from contacting my Block clients, but then rented an office in a very visible location and many of them had no trouble finding me.
Absolutely love the work that Lina Khan is doing. Matt, thanks for staying on top of these developments!
On a related note, I would like to point out the spectacular gaslighting by RealPage VP and economist Jay Parsons. It is beyond entertaining to see this company pontificating on Congress' failure to pass support for affordable housing given the circumstances and the antitrust litigation RealPage is involved in.
"Congress passed a $1.7 trillion spending bill at the end of December but failed to include multiple proposed measures for affordable housing and low-income renters. It was disheartening to see Congress didn’t expand the Low-Income Housing Tax Credit, or even restore a lost 12.5% increase which alone could fund an estimated 55k affordable units, in the $1.7 trillion spending bill. Congress also failed to expand housing vouchers despite long waitlists."
The truly entertaining part of Mr. Parson's rant is that RealPage advertises on its own site that part of its pricing advisory services includes an offer to help clients "Maximize revenue from rent-limited and affordable properties"
How about NDAs next? It seems the originalists on the Supreme Court would be opposed to such a restriction on free speech(if it weren’t for the money and control that is).
A friend of mine had a franchise that was under a non-compete. She worked for years building it up. I don't know what happened, it seemed like something she didn't want to share, but she felt she had to give up the franchise. But with the 2-year non-compete, she almost had to declare bankruptcy. She managed to start something from scratch in a completely different field. It took YEARS, but she is now on solid ground. This sort of thing can destroy lives.
This is off-topic, but I'd highly recommend keeping a close eye on the AI space over the next year or two.
OpenAI's chatGPT is a big deal. While crypto technology fails to deliver any note-worthy use-cases, this new AI technology will do the opposite. I don't think many people are ready for the amount of disruption that it will cause in the labor markets. It'll be interesting to see how the major tech players react to it's emergence.
I asked it to write an emphatic response to your article and it gave me this:
"This is a no-brainer. Non-compete agreements are a complete joke and have no place in a supposedly "free" country. It's outrageous that companies are able to essentially enslave their employees and prevent them from seeking better opportunities elsewhere. I'm thrilled to see the Federal Trade Commission taking action to eliminate these ridiculous contracts, and I hope that they are successful in doing so. It's time for workers to be able to freely switch jobs and advance their careers without being held back by oppressive non-compete agreements. Good on the President, Vice-President, and members of Congress from both parties for speaking out in support of this proposal. The U.S. Chamber of Commerce can go jump off a cliff for all I care. Non-competes need to go, and I hope they are eliminated once and for all."
Thanks again Matt. Getting an email that you've published a piece is a highlight of my day!
This is going to be a big deal for healthcare in my relatively rural (or at least isolated) city. A second hospital is opening up, and there are many nurses and doctors currently captured by non-compete agreements. This is just one example of a litany.
Matt, you’re doing great work, and so is Lina Kahn! This is such exciting news!
I avoided signing a non-compete for a summer internship in college simply by saying “my lawyer told me not to sign that”, and they hired me anyway. Incredibly, that contract was for a $9 an hour job at a small chemical testing company that tested feed and grain. They had all their employees sign the contract, and I assume they relied on ignorance and never had any pushback. Labor needs protection from rackets like this.
Great write-up, as always, Matt.
While I just left my employer last week for another industry, they have a veritable choke-hold on a majority of their employees between their expansive non-compete and forced arbitration agreements. And they're no small fish, with over 13,000 employees in the States.
I happen to live in a state that does uphold non-competes and this particular industry (Healthcare IT) is an insular one, with few other options and little real competition due to the massive friction in changing systems (also, the employer enforces the non-compete by restricting necessary system access if you went to work for a customer). The employer has homegrown everything and doesn't engage with the larger tech community, resulting in their employees having little direct overlap with respect to tech/coding platforms.
Given their now two year non-compete and dominance in the US market, their customer support staff can't leave. Two years out of the industry is career suicide. Yet any of them would be wildly overqualified for the customer side (hospital IT staff), where they would receive more pay and much more generous PTO.
It's clear action from the FTC would dismantle this egregious imbalance of power. This company would be forced to negotiate with their employees, something they pathologically opposed to (see their Supreme Court cases...).
This is only one of many, many areas in which employer power has expanded to a gross extent. In this particular case, if their employee base was able to be mobile, many healthcare systems around the country would have access to great talent, while the company itself would need to raise its standard of care for the employee. I have dry eyes for the company's 'loss'; arguably, they would have a more dedicated employee base by securing employees through being competitive in the workplace, not through punitive, draconian contracts.
In Texas, Nurse Practitioners are basically indentured servants. Although they hold Master's and many have Doctorates, they cannot work in Texas unless they have an annual contract signed by a physician. What does the physician do in ruturn? A monthly phone call is the minimal requirement. The physician never has to visit the NP workplace or do anything else. Direct supervision of NP's ended in 2013, yet the Texas Legislature (Texas Medical Association minions) did not eliminate the contract (AKA delegation agreement). Why? Because many physicians charge, some up to nearly $100,000 for an annual agreement. Many physicians are kind hearted and charge nothing. Also, they can control the "competition". The sad part is now nearly 80% of physicians are employed, and their employers prohibit them from delegating to anyone outside their clinics or facilities. This creates even more barriers to access to care for especially rural and poor people. Does it seem right that one profession is able to control another profession? Texas is one of nine states left in the U.S. in which the NPs are endentured. Most of other states got rid of those ridiculous requirements years ago.
This is an excellent article!
Can I share it on Twitter and other media platforms?
I am sure EM docs and others will be ecstatic this is finally being scrutinized! Long overdue!
I find it especially rich that the legal profession has deemed non-competes unethical for themselves but A-ok for everyone else.
The U.S. Chamber of Commerce calling the action ‘blatantly illegal’ again confirms they stand for the market power of monopolistic corporations and against any effort that benefits the working class. It is time for labor to get their fair share of America’s wealth and stop the transfer of wealth from the working class to the
to the elites.
I had a non-compete once. I ignored it. The employer huffed and puffed and did nothing.
This is fantastic but it barely scratches the surface. Employer based health care has the same effect on many many more employees by reducing their mobility and the suppression of unions prevents effective bargaining at the same job. And don't forget, a captive labor market is a tool that BIG business uses against small companies.
A very welcome change that will help millions.
Even Jimmy John's, a sub sandwich chain used non-competes on its workers. These folks make barely over minimum wage and companies are going to claim that their sandwich-making skills are so unique that moving to another company is going to hurt Jimmy John's. It's so absurd on its face as to be laughable, so it's great that this travesty is coming to an end.
When I left H & R Block to establish my own tax preparation firm I was subject to a one year non-compete, which I felt was not unreasonable as my clients were loyal to me and not to Block and taking them with me would have harmed the firm. So, I refrained from contacting my Block clients, but then rented an office in a very visible location and many of them had no trouble finding me.
Absolutely love the work that Lina Khan is doing. Matt, thanks for staying on top of these developments!
On a related note, I would like to point out the spectacular gaslighting by RealPage VP and economist Jay Parsons. It is beyond entertaining to see this company pontificating on Congress' failure to pass support for affordable housing given the circumstances and the antitrust litigation RealPage is involved in.
On January 4 Mr. Parsons penned how it was "disheartening" the year ended without more taxpayer support for affordable housing. #3 is a real hoot. https://www.realpage.com/analytics/5-big-stories-on-rental-housing-you-missed-during-the-holiday-break/
"Congress passed a $1.7 trillion spending bill at the end of December but failed to include multiple proposed measures for affordable housing and low-income renters. It was disheartening to see Congress didn’t expand the Low-Income Housing Tax Credit, or even restore a lost 12.5% increase which alone could fund an estimated 55k affordable units, in the $1.7 trillion spending bill. Congress also failed to expand housing vouchers despite long waitlists."
The truly entertaining part of Mr. Parson's rant is that RealPage advertises on its own site that part of its pricing advisory services includes an offer to help clients "Maximize revenue from rent-limited and affordable properties"
https://www.realpage.com/asset-optimization/revenue-management/
You can't make this shit up! LOL!
YESSSSS!!!! This will be a huge step toward revitalizing the economy.
"In the 1970s, Massachusetts had Harvard" -- koff koff, don't forget MIT :-)
How about NDAs next? It seems the originalists on the Supreme Court would be opposed to such a restriction on free speech(if it weren’t for the money and control that is).
A friend of mine had a franchise that was under a non-compete. She worked for years building it up. I don't know what happened, it seemed like something she didn't want to share, but she felt she had to give up the franchise. But with the 2-year non-compete, she almost had to declare bankruptcy. She managed to start something from scratch in a completely different field. It took YEARS, but she is now on solid ground. This sort of thing can destroy lives.
Freakonomics did a recent series on Adam Smith (https://freakonomics.com/podcast-tag/in-search-of-the-real-adam-smith/) The quote on Smith’s foot stone at his grave stayed with me and in a sense anticipates the rise of non-competes and the FTC action.
“The property which every man has in his own labor is the original foundation of all other property, so it is the most sacred and inviolable.”
I would go after some of those shady NDAs next.
This is off-topic, but I'd highly recommend keeping a close eye on the AI space over the next year or two.
OpenAI's chatGPT is a big deal. While crypto technology fails to deliver any note-worthy use-cases, this new AI technology will do the opposite. I don't think many people are ready for the amount of disruption that it will cause in the labor markets. It'll be interesting to see how the major tech players react to it's emergence.
I asked it to write an emphatic response to your article and it gave me this:
"This is a no-brainer. Non-compete agreements are a complete joke and have no place in a supposedly "free" country. It's outrageous that companies are able to essentially enslave their employees and prevent them from seeking better opportunities elsewhere. I'm thrilled to see the Federal Trade Commission taking action to eliminate these ridiculous contracts, and I hope that they are successful in doing so. It's time for workers to be able to freely switch jobs and advance their careers without being held back by oppressive non-compete agreements. Good on the President, Vice-President, and members of Congress from both parties for speaking out in support of this proposal. The U.S. Chamber of Commerce can go jump off a cliff for all I care. Non-competes need to go, and I hope they are eliminated once and for all."
Thanks again Matt. Getting an email that you've published a piece is a highlight of my day!
This is going to be a big deal for healthcare in my relatively rural (or at least isolated) city. A second hospital is opening up, and there are many nurses and doctors currently captured by non-compete agreements. This is just one example of a litany.