Federal judge strikes down Biden administration ban on worker 'noncompete' agreements...

[The Tradition]

Aug 20 (Reuters) - A federal judge in Texas on Tuesday barred a U.S. Federal Trade Commission rule from taking effect that would ban agreements commonly signed by workers not to join their employers' rivals or launch competing businesses.

U.S. District Judge Ada Brown in Dallas said the FTC, which enforces federal antitrust laws, does not have the authority to ban practices it deems unfair methods of competition by adopting broad rules.

Brown had temporarily blocked the rule in July while she considered a bid by the U.S. Chamber of Commerce, the country's largest business lobby, and tax service firm Ryan to strike it down entirely. The rule was set to take effect Sept. 4.
Brown in her ruling said that even if the FTC had the power to adopt the rule, the agency had not justified banning virtually all noncompete agreements.

"The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition ... instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious," wrote Brown, an appointee of Republican former President Donald Trump.

FTC spokesperson Victoria Graham said the agency was disappointed with the ruling and is "seriously considering a potential appeal."

"Today's decision does not prevent the FTC from addressing noncompetes through case-by-base enforcement actions," Graham said in a statement.

The Chamber of Commerce did not immediately respond to a request for comment.

The Democratic-controlled FTC approved the ban on noncompete agreements in a 3-2 vote in May. The commission and supporters of the rule say the agreements are an unfair restraint on competition that violate U.S. antitrust law and suppress workers' wages and mobility.

https://www.reuters.com/legal/us-judge-strikes-down-biden-administration-ban-worker-noncompete-agreements-2024-08-20/

 

[Huey Grey]

Rs dumping all over the worker again. No big surprise there.

 

[Hoosierhawkeye]

Rs dumping all over the worker again. No big surprise there.

R's hating small business too. Non-competes stop people who work in a business and figure out how to do it better from opening their own business.

Only competition the right likes is the competition between workers to work for lower wages.

 

[Dr. Phil Seuss]

"Today's decision does not prevent the FTC from addressing noncompetes through case-by-base enforcement actions," Graham said in a statement.

Lolz. Let the appeals process commence.

 

[Aardvark86]

High level reactions:
-- the broad chevron-loper/major questions doctrine line of attack may not be the greatest fit for this case, since there is at least here a delegation of "some" regulatory authority to the FTC.
-- the line of attack around overbreadth, on the other hand, may well have some legs to it even under more traditional administrative law principles.

 

[Finance85]

A large number of non-competes aren't enforceable anyway. Some of the comments are just ignorant. Non-competes are necessary in some situations, and if negotiated properly, actually protect the worker to some degree. Early in my career in tech consulting, I had 2 different companies make noise about trying to enforce non-compete agreements against me. The first company found out they didn't actually have a signed document because they rushed to get me on board and neglected some paperwork. The second company used a form they found on the internet that had already been litigated as unenforceable in my state.

Small companies can be brutal in enforcing non-compete agreements, i.e., holding employees hostage by playing with compensation and benefits packages while knowing the employee doesn't want to be sued if they leave. It can cut both ways. If the FTC wants to make rules, they should come up with template agreements, or at least rules, that would make an agreement fair. It's not their job to do that, as it should be legislated. Things like industry, time, distance, trade secrets, clients, and industry knowledge. There also needs to be a clear quid pro quo other than just having a job.

 

[Aardvark86]

A large number of non-competes aren't enforceable anyway. Some of the comments are just ignorant. Non-competes are necessary in some situations, and if negotiated properly, actually protect the worker to some degree. Early in my career in tech consulting, I had 2 different companies make noise about trying to enforce non-compete agreements against me. The first company found out they didn't actually have a signed document because they rushed to get me on board and neglected some paperwork. The second company used a form they found on the internet that had already been litigated as unenforceable in my state.

Small companies can be brutal in enforcing non-compete agreements, i.e., holding employees hostage by playing with compensation and benefits packages while knowing the employee doesn't want to be sued if they leave. It can cut both ways. If the FTC wants to make rules, they should come up with template agreements, or at least rules, that would make an agreement fair. It's not their job to do that, as it should be legislated. Things like industry, time, distance, trade secrets, clients, and industry knowledge. There also needs to be a clear quid pro quo other than just having a job.

indeed. many are really just in terrorem things that are completely unenforceable. For example, my daughter was working in a local real estate agency supporting agents in basically an entry position; no unique expertise or protocols (at least none they hadn't essentially franchised in from a larger real estate agency); no enduring relationships with institutional customers; and we're talking about metro Atlanta where there's precisely zero to distinguish one local agent from another. i told her basically just not to take any documents, or solicit any clients who otherwise aren't your independent friends, and you'll be fine..

 

[Uniformed_ReRe]

A large number of non-competes aren't enforceable anyway. Some of the comments are just ignorant. Non-competes are necessary in some situations, and if negotiated properly, actually protect the worker to some degree. Early in my career in tech consulting, I had 2 different companies make noise about trying to enforce non-compete agreements against me. The first company found out they didn't actually have a signed document because they rushed to get me on board and neglected some paperwork. The second company used a form they found on the internet that had already been litigated as unenforceable in my state.

Small companies can be brutal in enforcing non-compete agreements, i.e., holding employees hostage by playing with compensation and benefits packages while knowing the employee doesn't want to be sued if they leave. It can cut both ways. If the FTC wants to make rules, they should come up with template agreements, or at least rules, that would make an agreement fair. It's not their job to do that, as it should be legislated. Things like industry, time, distance, trade secrets, clients, and industry knowledge. There also needs to be a clear quid pro quo other than just having a job.

It sounds more like you got lucky.

Most workers aren't in a position to fight litigation by employers and most don't have the leverage to refuse jobs that insist on non-competes.

 

[millah_22]

I don't see non-competes as an issue. Typically the worker agrees to it before they work for a company, right? Don't like the stipulation, don't sign the contract right? 🤷‍♂️

 

[millah_22]

R's hating small business too. Non-competes stop people who work in a business and figure out how to do it better from opening their own business.

Only competition the right likes is the competition between workers to work for lower wages.

Are non-competes typically forever? I see them as a way to prevent people from coming in, stealing IP, and then pushing out previous employers from the market.

 

[TarponSpringsNole]

Florida is a right to work state, so it’s difficult enforcing the non-competes They’re quite prevalent in the pest control industry in order to protect poaching of customers.

 

[millah_22]

Are non-competes ever voided by layoffs?

Like if I sign a non-compete, obv I can't quit and go to a competitor. But if my company lays me off, would that void the non-compete to allow me to go to a competitor? Or is that a case-by-case scenario?

 

[Old_wrestling_fan]

I don't see non-competes as an issue. Typically the worker agrees to it before they work for a company, right? Don't like the stipulation, don't sign the contract right? 🤷‍♂️

Caveat, I have had some exposure to non-competes, not a lot though. But I do remember a time when a range of people, including me, were asked to sign one post-employment. I did not sign it, I really don't remember specifically what everyone else did, but some did and some didn't as I recall. FWIW.

Meanwhile...as an employer, I do favor some form of non-compete. In Iowa, things are tilted to favor employees, which is fine with me, in general. Short, short version...if someone was to say buy another business...it is customary for certain, key employees to be asked to sign a non-compete. Without that, businesses would be "worth" far less to potential buyers and be much more unstable IMO.

So there are legit scenarios where the stability offered by non-competes benefits all employees.

 

[Old_wrestling_fan]

Are non-competes ever voided by layoffs?

Like if I sign a non-compete, obv I can't quit and go to a competitor. But if my company lays me off, would that void the non-compete to allow me to go to a competitor? Or is that a case-by-case scenario?

My experience, limited, is yes, if the ee is discharged then the non-compete is null and void. Companies, at least here in Iowa, really cannot get away with creating a "hostage" situation on ee's.

 

[Old_wrestling_fan]

Are non-competes typically forever? I see them as a way to prevent people from coming in, stealing IP, and then pushing out previous employers from the market.

Anything that I have seen has a specified time limit. Again, in Iowa, I am pretty sure that a non-compete in perpetuity would not stand up.

 

[Finance85]

Are non-competes ever voided by layoffs?

Like if I sign a non-compete, obv I can't quit and go to a competitor. But if my company lays me off, would that void the non-compete to allow me to go to a competitor? Or is that a case-by-case scenario?

In most cases, the non-complete wouldn't be enforceable if the employer lays you off. There might be some exceptions if you are fired for a cause that's related to the terms of the non-compete. It just depends on how it's written, and if any sections are severable, i.e., taking client lists or clients could be a problem.

 

[millah_22]

In most cases, the non-complete wouldn't be enforceable if the employer lays you off. There might be some exceptions if you are fired for a cause that's related to the terms of the non-compete. It just depends on how it's written, and if any sections are severable, i.e., taking client lists or clients could be a problem.

Right, I would expect it for a cause or quitting, but just wondered about company layoff.

 

[Finance85]

Right, I would expect it for a cause or quitting, but just wondered about company layoff.

I don't really see how it would be enforceable for a layoff as long as no proprietary information is taken.

 

[millah_22]

I don't really see how it would be enforceable for a layoff as long as no proprietary information is taken.

Sure. In my industry there aren't too many non-competes but they do exist. They are much more strict about IP though. If I take any native files to a competitor they'd be coming for me.

 

[Hoosierhawkeye]

Are non-competes ever voided by layoffs?

Like if I sign a non-compete, obv I can't quit and go to a competitor. But if my company lays me off, would that void the non-compete to allow me to go to a competitor? Or is that a case-by-case scenario?

Thing is that non-competes are being abused now to just try to keep people stuck in their job. I think I saw some fast food places were having line workers sign non competes.

I believe the new rules made it so that if you wanted someone to sign a non-compete agreement they had to be making at least a 6 figure salary.

 

[millah_22]

Thing is that non-competes are being abused now to just try to keep people stuck in their job. I think I saw some fast food places were having line workers sign non competes.

I believe the new rules made it so that if you wanted someone to sign a non-compete agreement they had to be making at least a 6 figure salary.

wild if true.

 

[Formerly Rockymtnole]

Are non-competes ever voided by layoffs?

Like if I sign a non-compete, obv I can't quit and go to a competitor. But if my company lays me off, would that void the non-compete to allow me to go to a competitor? Or is that a case-by-case scenario?

Most are written as applying for any type of separation.

However, you’d have to be a vindictive moron and have attorneys who are even bigger morons to try to enforce a noncompete against someone you laid off.

The FTC reg was fine, content wise. It still permitted companies to have reasonable noncompetes/nonsolicitation agreements aimed at ex-employees going after former customers.

What it prevented was agreements that really limited employees’ freedom of movement and potential job opportunities. Like if you’re a salesperson for CocaCola in Florida, you couldn’t go to work as a salesperson for Pepsi in Iowa. Those restrictions would likely already be unenforceable under pretty much any state law. The FTC reg just established a national standard.

 

[Old_wrestling_fan]

wild if true.

Hey, that secret sauce is serious bidness.