The new Democratic majority at the Federal Trade Commission, led by its new progressive chairwoman, Lina Khan, is expected to adopt pro-labor rules prohibiting noncompete clauses and exclusionary contracts by dominant firms.
Agency commissioners of both parties have expressed interested in reforming noncompete agreements, with some wanting the commission to issue a rule immediately to limit the clauses.
"I think this issue is high priority for Democrats and would draw helpful attention and advocacy to the FTC as a place where real change can occur, instead of Congress, where not much is happening," said Sandeep Vaheesan, legal director at the Open Markets Institute, an anti-monopoly think tank.
"Unions are also interested in such rules and are pushing the FTC to focus on making it easier for workers to change employers," Vaheesan said.
Millions of workers are looking for new employers now that the coronavirus pandemic has subsided, with a record number quitting old jobs in search of better opportunities thanks to the huge surge in job openings.
Corporations argue that noncompete agreements serve to protect a company’s investments in worker training and curb the loss of trade secrets and proprietary information. Critics, though, argue their main purpose is actually to hold wages down by limiting workers’ ability to sell their skills to the highest bidder.
Two Democratic commissioners at the FTC, Rohit Chopra and Rebecca Kelly Slaughter, have expressed support for restrictions on noncompete clauses and exclusionary contracts.
President Joe Biden last week put Khan in charge of the FTC, and she, too, is expected to be in favor of fewer restrictions on job contracts, Vaheesan said.
Republican Commissioner Noah Phillips said earlier this year that although he is concerned about noncompete clauses, he was worried about the legal basis for the commission restricting them because Congress has not weighed in and given it the green light.
A study on Oregon's hourly paid workers after the state banned noncompete agreements suggested that such a policy would provide significant pay raises to low-income earners.
The issue first gained attention in 2014 when an investigation was opened into sandwich chain Jimmy John's use of noncompete agreements at its franchises in New York. Its contract prevented employees from taking jobs with Jimmy John's competitors for two years after leaving the company and stopped them from working within 2 miles of a Jimmy John's store. The practice was deemed illegal by the New York attorney general's office, and the chain agreed to stop including noncompete agreements in its hiring documents.
In 2018, a number of fast-food chains, including Arby’s, Carl’s Jr., McDonald’s, Jimmy John’s, Auntie Anne’s, Buffalo Wild Wings, and Cinnabon, made similar pledges to stop using noncompete agreements following an inquiry by a coalition of state attorneys general.
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Original Author: Nihal Krishan