29 Comments
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Apr 24Liked by Matt Stoller, Todd Mentch

YESSS!!! I know it's not over yet, but this is a great step forward, and I have no doubt that Matt helped make it happen, as did we, his subscribers. Great work all!

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founding
Apr 24Liked by Matt Stoller, Todd Mentch

Thanks Matt for the work you have done to help get this indentured servitude requirement turn over. Workers will now be free to decide what is best for them and their families and not what is best for corporations that only care about profits for themselves and their shareholders. Contrary to what the useless Milton Friedman said, generating profits for shareholders is not the prime directive of corporations. Employees produce the products of corporations, and they are the consumers that buy these products. Accordingly, they deserve the power to organize and to earn a fair share of the profits of their production.

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Apr 24Liked by Matt Stoller, Todd Mentch

The legal filings by Scalia are so incredibly shoddy that I’m shocked that he would even go ahead with filing lawsuit as is. It is so nakedly a hack job that it calls into question his ability to be a lawyer.

It’ll be interesting to see how this goes down politically, especially the current weird alignment in terms of the political parties and business

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Apr 24·edited Apr 24Liked by Matt Stoller

Nobody hate the free market more than America's oligarchy.

For them, "free market" means that they are free to buy politicians.

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Apr 24Liked by Matt Stoller, Todd Mentch

It’s a win that plays out well with voters and that’s important in the fight to rein in monopolistic capitalism.

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If lawmaking authority was specifically delegated to a federal agency by Congress, as it appears it was here, the novel judicial theory called the “Major Questions Doctrine” is moot. The ultraconservative Trump appointed SCOTUS has used this ridiculous judicial theory in several important cases in their quest to dismantle the administrative state.

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Apr 24Liked by Matt Stoller

Indeed. However this going to the same court that created consumer-level forced arbitration makes me apprehensive that they will find a way...

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Great day for a competitive American economy. It’s competition that promotes innovation and creates jobs. The economy we have now, is really good at making wealthy people wealthier. What’s needed instead is one that works for all of us.

Eliminating non-competes will help. So will enforcing our antitrust laws and breaking up the monopolies that dominate so many sectors. Biden is doing all of these things. Four more years of him and we’ll have a much stronger economy that works for all of us.

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Hello,

I live in New Hampshire. I recently had a conversation with my hair stylist. She told me that ALL the products they use to provide their salon services went up in price. The price hike was to such a degree that they had to raise their rates for services. The rate increase meant that some clients were priced out. One example she provided was foils that used to cost $10 per box, now are over $25 per box.

My immediate thought was price fixing.

Her takeaway is that both political parties are bad, and none are looking out for business owners.

I conducted a google search when I got home and was disturbed by the results. Almost all the results were from 2022 and they were helpful hints on how beauty solons can explain raising their rates to their clients. I found nothing addressing the underlying reason.

Any information you can provide on how these products suddenly went up in price affecting an entire service industry would be helpful.

Thank you.

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Matt, have you ever looked into the studies on corporate directorship interlocks? They are global and seem dangerous for a "free society". Here is an article about Sen. Let Metcalf's study from 1977/78.

https://www.nytimes.com/1978/04/23/archives/washington-report-interlocking-directorates-flourish.html

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I know your team is incredibly thorough but I thought I'd add my two cents. Having seen indentured servitude in tech and in the research space for other reasons.

Non-competes are a fundamental distortion to the 'market' of wages. So, at the sake of sounding like a cassandra, big business should not oppose it. We are not serfs. Its the ebb and flow of both sides of the economic spectrum that brings out natural balances. Corrupt, inefficient business fail, as does big business without bailouts, excellence should be rewarded, otherwise while there is the personal commitment to perform to one's highest ability, outperforming your cohort (I love the word cohort!) deserves compensation. What, Scalia describes is a negative incentive structure that I would imagine reduces productivity.

As far as the the consumer side argument. A fundamental societal shift in the thinking of society and the way society is organized is a fundamental right of a free society. Particularly if consensus can be reached. The precedent argument is tougher to negate in my eyes. But arguably if corruption or flawed thinking is perpetuated through time. Does that make it fair/just, or in line with the constitution? Again a flawed argument. Communication and shared information is so much more rapid in the last 20 years. That falls into Scalia's third point as well. At lastly I suspect that kicking the can to congress is a stall, in the hopes that nothing will get done. A smart tactic objectively.

https://eig.org/policy/non-compete-reform/

https://www.gao.gov/products/gao-23-103785

https://one.oecd.org/document/DAF/COMP(2019)2/en/pdf

https://home.treasury.gov/system/files/136/State-of-Labor-Market-Competition-2022.pdf

https://www.epi.org/publication/noncompete-agreements/

https://www.minneapolisfed.org/article/2021/non-compete-contracts-sideline-low-wage-workers

Full disclosure. Whenever I post one of these links, I expect no one to read them but I try and read them through a couple of times myself. I skimmed the oecd pdf because it's hella long.

Thank you for all you do!

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founding

My take is that non-competes advantage existing businesses over those that have yet to be started. This is why it's so hard to put together a legislative effort to eliminate them in most states: the businesses that don't exist yet don't have lobbyists (though I would think venture capitalists would strongly oppose non-competes; not sure whether that's happened).

California has proven that the economy as a whole is more vibrant without non-competes, but the incentives for individual businesses, and the legislators they contribute to, are to keep them. It's a classic tragedy of the commons.

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Yawn. Non-competes are unenforceable 99% of the time. I’m sorry for the people who have been intimidated by HR and didn’t ask a lawyer. The 1% of the time they are enforceable, they are a hurdle to the Venture Capital industry, who clearly paid for the graphic in the article promising a boom in innovation.

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author

If an employer is willing to spend $50,000 to enforce a non-compete, you still have to find a competent lawyer and pay him/her to defend you. A lot of people can't do that.

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I'm not against the ruling, I just think it isn't going to change lives dramatically.

There are many statistics quantifying the millions of people who sign non-competes. There are no results when searching for the number of people who have been sued by a company. I don't know anyone. Do you?

VC's will benefit the most from this ruling. They can recruit founders from big corporations - the ones investors like to see in a pitch decks.

Corporations will find another hand-cuff to protect their IP. For example, is a Non Disclosure Agreement covered by this ruling? Probably not, because that is what VC's use.

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Good point on the NDA. It's such a good point that the FTC considered it in their rule.

"Proposed § 910.1(b)(2) accordingly sought to clarify that the definition in proposed § 910.1(b)(1) includes contractual terms that are de facto non-competes because they have the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer. It then provided two illustrative, non-exhaustive examples of contractual terms that may be such functional non-competes: (1) an NDA between an employer and a worker written so broadly that

it effectively precludes the worker from working in the same field after the conclusion of the worker’s employment with the employer; and (2) a training-repayment agreement (“TRAP”) that requires the worker to pay the employer or a third-party entity for training costs if the worker’s employment terminates within a specified time period, where the required payment is not reasonably related to the costs the employer incurred to train the worker."

To answer your question, yes I do know a few people who have been sued. It surprised me to hear of it.

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"There are no results when searching for the number of people who have been sued by a company. I don't know anyone. Do you?"

Yes. Non-competes have a chilling effect on wages because employees are afraid that they can be sued and their time and money wasted, even knowing they'll win.

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Well, I know one person who was very badly impacted by a non-compete. In fact , they almost went bankrupt. So that's not a yawn in my book.

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I’m very sorry for that person even though I don’t know the whole story.

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Fortunately, my friend was an excellent business woman. She's pulled herself out of this and is doing very well. I've been going through a very bad period and she's been trying to help me with sound advice. But she shouldn't have had to go through this in the first place.

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She will be a better leader. It takes courage to move past being burned.

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founding

Non-competes have a subtle but pervasive impact on company culture. Without them, companies have to put more effort into making themselves good places to work. With them, employees feel a little more like serfs. I saw this firsthand once -- the California startup I had been working for was acquired by a New Jersey startup. They couldn't understand how we kept people motivated; but in fact, we were very motivated.

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Agree - when leaders focus on what motivating people (and it’s not just money), instead of starting relationships with a legal contract- much more productive culture! The best culture I worked for was an employee owned company. Everyone was motivated to make this a company they were proud to work for.

I suspect the NJ firm that bought yours was owned by a VC.

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Maybe the best thing is to not work where a non-compete is required for personal employment. You are subjecting yourself to an opressive employer

Employers using contractors to do projects within a time frame should consider protecting their entities with non-compete agreements. Entities that do research, manufacturing, and develop unique methods should be allowed to have non-disclosures with employees. Otherwise there is no reason to do research, develop new products and new methods if your employees could sell proprietary knowledge to potential competition.

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Do you know how hard it is to find work these days? People often do not have a choice.

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Maybe I should have said its best to avoid work where a non-compete is required. Yes, I understand that you may not have a choice when you need to work, I have been there. I recommend getting out as soon as you can. I have been an employee of oppressive employers, and learned how to keep people happy as an employer.

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Here’s an idea. TikTok US management sets an example for a better way: finance a new US employee owned company to buy it from Byte Dance, with 51% controlling interest. The rest is publically traded.

My thinking is that the employees will be motivated (without a non-compete or NDA) to not compete or disclose because they personally benefit from protecting the IP, even when they leave the company.

If they choose to sell their interest when they leave, only then a limited NDA or non-compete may be appropriate to protect fellow employee owners.

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One of the major reasons I was hoping for this rule was to regulate hospitals, but my impression is that FTC rules don't cover non-profits (which many hospitals are poorly classified as). Am I mistaken? What can be done for all the doctors who are boxed in by local monopolies if not?

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author

States can pass non-compete bans. Minnesota did that last year.

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