The Financial Times reports that since the Federal Trade Commission (FTC) announced a proposal that would ban all non-compete clauses, industry groups have been “inflamed,” and the regulator “has received thousands of comments, with critics arguing the measure is too drastic and will increase business costs while putting trade secrets in jeopardy.”
FT notes that “non-compete agreements have become more pervasive in the US economy, experts say, amid little oversight and a drop in unionisation. Bosses can now obtain pre-packaged non-compete agreements online. Approximately one in five American workers … are now bound by non-competes, according to the FTC. These agreements bar workers from joining a competitor for a set period of time, within a geographical area, or both. They are often associated with high-wage executives with access to trade secrets that companies fear may leak upon their departure. But experts argue they have become widespread among low-wage workers who often have no access to sensitive information. These workers are also more likely to be locked into jobs because they lack the means to negotiate with employers, they are unable to move house, or they can’t afford to wait before starting a new job. The FTC argues non-competes harm competition in labour markets, discouraging businesses from competing for staff with attractive pay.”
KC’s View:
Confidentiality agreements ought to be enough to protect companies.
I firmly believe that non-compete clauses are counter-productive in the long run. They inhibit industries’ growth by preventing companies’ access to good people who can help them grow, which isn’t good for innovation or for broader economic prosperity. I hope the FTC is successful in getting rid of them, though I’m sure it will be a slog in which lawyers and lobbyists will do their best to screw up the works.
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