FTC Proposes Rule to Ban Noncompete Clauses, Which Hurt Workers and Harm Competition
OK.
This Part 910 shall supersede any State statute, regulation, order, or interpretation to the extent that such statute, regulation, order, or interpretation is inconsistent with this Part 910. A State statute, regulation, order, or interpretation is not inconsistent with the provisions of this Part 910 if the protection such statute, regulation, order, or interpretation affords any worker is greater than the protection provided under this Part 910.
So the military can no longer stop retirees from working in the civil service, or other inappropriate jobs.
The CIA cannot stop people moving over to the KGB.
Banks can’t stop people moving to the opposition’s dealing desk after lunch.
Or, as we might put it, the FTC isn’t, in fact, thinking.
Non-competes which apply to burger flippers are of course absurd. But there are areas where they’re both useful and entirely sensible.
Twats.
Or, just another infringement of:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
The CIA cannot stop people moving over to the KGB.
I think that might be covered by other restrictions besides non-compete clauses in their contracts. (NDAs maybe?)
I’m sceptical about such a law, particularly framed so broadly, but most of these examples are pretty off. Do State laws actually apply to most of them?
Do they really do this via soldiers’ employment contracts? Surely such things are part of civil service recruitment rules?
I was going to defect but my employment contract says not to.
This one might be fair, but I bet there’s about 60 regulatory agencies ready to crucify the opposition.
Sorry, but why should the workers not be free to sell their labour anywhere else they want if they leave, or are even terminated from, their job?
Currently in my first ever job with a noncompete, which was signed only after much sucking of air through teeth, negotiated reduction in duration from a career-ending year, and insistence on payment of substantial part of salary for the full duration of the noncompete. And I’m somewhat closer to the burger flipper than Master of the Universe in salary stakes.
The concept sucks, it is bad for workers, it is bad for employers (because it makes poaching hard), and bad for the economy. Worried your staff will leave and take some of your secret sauce with them? Well, treat them and pay them so they stay! Simples.
“So the military can no longer stop retirees from working in the civil service, or other inappropriate jobs.”
Our military already can’t do that except insofar as something a retiree does violates the UCMJ – which retirees are still subject to.
Beyond some statutory prohibitions (that can still be waived) ok taking certain political jobs (like Secretary of Defense).
Not US but UK, but I had a firm sue me for breech of contract over non-compete clauses. After lots of umming and ahhhing both solicitors agreed that not only did it apply, but it was unenforceable.
Unless you’re some senior executive (I was non-executive senior consultant) then non-compete clauses are just restraint of trade, pure and simple.
*both solicitors agreed that not only did it not apply, but it was unenforceable.*
Argh!
Indeed so. English law retains the common law idea that the restraint must be reasonable and proportionate. Which American law seemingly abandoned a long time ago. Well, OK. But the way the FTC is writing this new one is abandoning the possibility even when reasonable and proportionate.
To give an example, Bankers changing jobs, gardening leave – which is non-compete really – is standard. But it must be proportionate. So, of course you can’t allow someone who knows the detail of your book to be working across the street right after lunch. But how long? Well, that depends upon the length of the book, doesn’t it? Gardening leave might righteously last longer for those running a book taking three month bets (say, shorts on stocks, just an example) and those trading FX where long term is do I have time to look at my watch here?
It’s entirely true that American imposition of these has got out of hand. But then the FTC saying that they’re not to be allowed at all is also out of hand.
Banks can very easily stop people moving to a competitor after lunch – pay them “gardening leave”. In case that’s only a UK term, it’s where an employee who is leaving gets paid by their employer to do nothing (or, at least, nothing significant) so that they don’t immediately move to a competitor with fresh business intelligence. The conflict of interest that would arise prevents an employee from simultaneously working for a business and its competitor.
I’ve written and litigated US noncompetes. In most jurisdictions, they do need to be reasonable in geographic and time coverage, but they are certainly very enforceable and have become standard for positions requiring knowledge of company practices, company customer/supplier listings, and the like. Judges are going to laugh if you expect them to enforce the burger-flipper restriction, but if you (the company) invest, say, in great employee tech training, it’s reasonable to use NCA’s to keep competitors from poaching your well-trained staff and avoiding their own training expenses, or for employees to simply gather the customer contact lists and move on with them. Absent NCA’s, employers will be hesitant to invest in, or trust, their employees.
“Absent NCA’s, employers will be hesitant to invest in, or trust, their employees.”
Perhaps they should treat them properly so they don’t. Radical.
The problem there is companies giving “Training” (as in “Watch this video on Backoffice sub-processes and do the questionaire afterwards”) during work hours and then claiming that as part of multiple thousand dollars worth of training expenditure (which it clearly wasn’t) when you walk out the door.
I’ve had that and when challenged by solicitors they backed off.
A lot of this stuff is a bet that the employee won’t retain a solicitor.
So the military can no longer stop retirees from working in the civil service, or other inappropriate jobs.
What are you talking about? The civil service is stuffed to the gills with military retirees.
“ So the military can no longer stop retirees from working in the civil service, or other inappropriate jobs.”
I suspect the US is that sam, but here anything to do with employment generally has a carve-out or exemption for military personnel.
Charles – also known as “notice period”. Resign, told “don’t bother coming in for the next three months”. Get paid for watching Jeremy Kyle whilst scratching your arse. Don’t pop into the office of the new firm.
Thing is, everyone knows it’s rubbish. Just don’t take the piss.
Or, Gardening Leave, placed on. Possible regulatory or legal breaches. Compliance may or may not be shitting themselves. Or you just grabbed the wrong pair of tits. You really aren’t going to be finding another employer in this scenario, not for a bit, anyway. The words “Do you want fries with that?” may be a significant feature in your future.
Or, Gardening Leave, taking. AKA, knackered. Or, the charlie got a bit out of hand. Or, can’t find another job. Take your pick.
And Tim’s example doesn’t really work, only theoretically.
“The problem there is companies giving “Training” (as in “Watch this video on Backoffice sub-processes and do the questionaire afterwards”) during work hours and then claiming that as part of multiple thousand dollars worth of training expenditure (which it clearly wasn’t) when you walk out the door.”
Oh, certainly. I’m not saying that NCA’s aren’t overused. Just that there is a place for them in the right circumstance. And judges here (in the states in the USA in which I worked, at least) are pretty quick to knock them out when it’s just an over-reach.
Last one I worked on was at a firm that designed prototype molds for plastics injection manufacturing. All new employees who were involved in designing and estimating were sent to a month-long engineering school course for that process, at high expense. And, once the employees finished the course, the outside recruiters always descended on them – for good reason. So, they added the NCA.
And it’s always clear up front – if you want the job, they offer you X pay, X conditions, and an NCA. Your choice.
People keep complaining that the British apprenticeship system collapsed. That was partly because you’d train the tradesman and then he’d piss off to work for a competitor, denying you the return on your investment. Though, tbf, you also had unions driving up the apprentices’ pay too close to the tradesman’s so that employers just despaired of the whole idea.
On the other hand there were often agreements between employers (illicit?) not to “poach” each other’s employees. Plus if you left an employer your pension entitlement might just evaporate. So then Thatcher (I think) insisted that pension entitlements shouldn’t evaporate, so then – for that and other reasons – DB pensions became too expensive for employers, so … It’s one damn consequence after another.
@ dearieme
The DB problem wasn’t the insistence that non-trivial DB entitlements should be preserved (the employee already had a right to retain a non-trivial entitlement in contributory DB schemes) but Gordon Brown’s changes to laws on taxation of Pension Schemes followed by various retrospective changes to employee rights and then effectively compelling Pension Schemes to “invest in” (buy) government bonds on inadequate yields (thereby hiding the extent of New Labour’s overspending) that killed off DB schemes for private sector workers, except for the oil companies and most of the financial sector. I’m living in modest comfort on my Thatcher-era occupational pension.
Selling a small company? NCA is essential for the buyer, and you’ll get nothing if you don’t agree it.
O/T Can I be the first to wish Happy Christmas (Russian Orthodox version) to Steve. Peace on earth thanks to Putin’s generous cease fire initiative.
“The CIA cannot stop people moving over to the KGB”.
How can any ex CIA move to the KGB when they’re all working at Twitter, Google and Faceache?
@philip: There’s an exemption for substantial owners selling a business (or most of its assets) – §910.3. It’s the only exception in the proposal though.
Sure, but once again you’re talking executives primarily, who should have some combination of shareholders/directors agreement covering that sort of behaviour.
If your sale / merger includes non-executive staff then they are going to need some incentivisation (over and above their employment contract), since unilateral changes to contracts without remuneration can be deemed constructive dismissal if changes are determined by an employment tribunal to be punitive (and if not, why are you doing it).
I’ve been in exactly this situation and walked rather than accept a more punitive contract where the change in terms was 1 month to 3 months notice period and non-compete clause covering all past and current customers for 2 years after resignation. They offered a salary bump, but it simply wasn’t worth the additional money even though most of us thought the contract unenforceable because of essentially restraint of trade.
One does think of Roman law which placed certain restrictions and obligations on slaves after they’d become freedmen.
Which was fair enough, since an old tactic was to “Free” a slave once they had outlived their usefulness without any form of pension or other remuneration, essentially dumping them onto the charitable institutions of the city. With the institution of Cura Annonae (Roman corn dole) under Gaius Gracchus during the late Roman Republic, it was restricted to full citizens of Rome, so slaves and manumissioned freemen need not apply.
When I changed to current employer a good number of staff and clients followed me out the door. Admittedly after taking a few milliseconds to think about it. I am sufficiently respectful of my former employer, and of my moral and contractual obligations to them, to not tell anyone where I was going until I was gone. Once I was gone, it’s public knowledge anyway.
And yes, I got gardening leave, because the owners sniffed what was going to happen, which consisted of my being relieved of all work duties about 48 hours after resigning, email account locked out etc. Nice three months off.
That’s a good proportion of my value proposition. Underestimated by prior employer and correctly estimated, if at a gamble, by new employer. Snarling my move up would not have been good for me or the wider economy, only for former employer who was clearly keeping more of my “rent” than was, per free market, due to them.
I totally understand why my current employer doesn’t want me to do that to them at some future time, but in joining them I had to accept that the move was going to irreparably nuke a very important bridge, to one of the few companies that does what I do, and which is full of people I respect, love, and miss. I will feel the same when I move on from this job.
Maybe the investment wankers see this in a more cold-hearted and rational way, and going back to a former employer, whom your departure was bound to shaft in big and expensive ways, is easier.
At the end of the day, all gardening leave does is notify said staff and clients that they will get a bit more notice to change things.
Incidentally, I will also teach you everything I know, for a very reasonable fee, or even pro bono if it comes with knees up with mates time and an open bar tab. That is, bizarrely enough, also part of the value proposition because displaying one’s company’s competence to the world is fantastic business development. We had/have the same problem of headhunters picking off staff that work at current/former employer and moving them to other employers that can’t be bothered with the training. I have had to say many tearful goodbyes to really top people. We suck it up. Almost every former employee out there in the industry has fond memories of their times, they are quiet or not so quiet ambassadors for our business, and we get contracts all the time because of the former employees who hold client purse strings.
The UK MoD in particular is well stocked with ex-forces people. If it weren’t for them we’d not be capable of filling the vacancies that many wouldn’t even consider taking for the pay on offer. But AIUI the ex forces guys (and gals) get quite a nice pay package when they retire – which means they can afford to take a civvy post with less than stellar pay. Put bluntly, the pay on offer for the level of expertise & experience required is such that you generally need to have a reason other than pay (and ever eroding “perks”) to want to work for us.
And, speaking from a viewpoint of being a small cog in the machine delivering the next generation of nuclear subs, the operational experience of the ex-navy guys is a seriously important resource – particularly in knowing what systems were some combination of “sh*t to use”, “unreliable”, “hard to fix”, or a number of other descriptions, and hence having the first hand knowledge to turn round to the designers (typically not ex operators) and tell them (diplomatically) that the current proposition is “not a good solution”.