Commentary:
Here’s to the deep state … or, what we used to refer to as the federal government. With little fanfare, the Federal Trade Commission has leveled the playing field for millions of workers.
The FTC freed an estimated 30 million employees who are now bound to their current employers through non-compete clauses. On a 3-2 vote, the commission found that the clauses are an unfair method of competition and therefore a violation of Section 5 of the FTC Act which prohibits “unfair or deceptive acts or practices in or affecting commerce.”
There’s an exemption for senior executives in policy-making positions earning more than $151,164 a year, but those represent fewer than 1 percent of all workers now bound by a non-compete clause, and will phase out once current employees leave their jobs.
In a press release announcing the rule change, the FTC notes that employees with inside knowledge of company secrets are already bound by trade secret laws and non-disclosure agreements. And, they represent a small fraction of all workers now under non-compete clauses.
The FTC argues the non-compete clauses are not only bad for workers, who are forced to stay in jobs they don’t want or risk costly litigation, they also stifle competition and inhibit the creation of new businesses, leading to increased market concentration and, ultimately, higher prices for consumers.
“The FTC’s final rule that bans non-competes will ensure Americans have the freedom to pursue a new job, start a new business or bring a new idea to market,” FTC Chair Lina M. Khan said in a prepared statement.
According to a 2019 report by the Economic Policy Institute, a national survey of private-sector businesses showed that 49.4 percent had at least some employees who were subject to non-compete clauses and 31.8 percent said all employees were required to enter into the agreement.
That number had grown significantly since their previous survey in 2014. The survey also found that non-compete clauses were not restricted to white-collar workers.
The U.S. Chamber of Commerce has filed a lawsuit attempting to prevent the FTC ban from taking effect. A federal court in the buzzing financial hub of Tyler, Texas will be first to hear the case.
They argue that it should be up to Congress to impose a rule change so vast and impacting so many businesses and their workers. And on that point, they’re not wrong. Anything done by rulemaking in this administration can be undone by rulemaking in the next administration.
This absolutely should be taken up by Congress. Sadly, the one we have now is incapable of any such thoughtful deliberation. So, rulemaking is the best we can do for the time being.
All other arguments by the Chamber of Commerce ring hollow. Claims that non-compete clauses protect small businesses are absurd. They clearly protect the interests of the most powerful.
We like to believe that our free-market economy was built through robust competition. But, dating back to at least the robber barons of the 19th Century, there has always been a concerted effort by those in power to squash competition.
Non-compete clauses are just their latest tool.
Walter Rubel's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU. Walter Rubel can be reached at waltrubel@gmail.com