NATIONWIDE—The National Employment Law Project (NELP) applauds the Federal Trade Commission’s (FTC) proposed rule to ban non-compete contracts for all workers. The proliferation of these onerous and exploitative contracts, which impact millions of workers across industries, has restricted them from being able to pursue work in their chosen fields and lead to labor monopsony and depressed wages. These employment provisions are coercive in their inception and usage, and banning them is an excellent step in the right direction.
In 2019, NELP partnered with Open Markets Institute to petition the FTC to ban non-compete agreements. Additionally, NELP has worked in coalition with many organizations including the Service Employees International Union (SEIU) 32BJ, the Economic Policy Institute, the National Employment Lawyers Association of New York (NELA-NY), and the Economic Innovation Group to push for banning non-competes. Our efforts have led to many states moving to ban or limit non-compete agreements and recognizing the anti-competitive and anti-worker nature of these provisions.
“The FTC’s proposed ban will lift up workers throughout the country,” said Najah Farley, senior staff attorney at NELP. “Employers have taken advantage of the lack of laws and regulations in this area to push these agreements onto unsuspecting workers across all income levels and job titles. Non-competes degrade wages and working conditions by eliminating one of the most effective means workers have to improve their job quality—advocating for or moving to a better job.”
“Banning non-competes for all workers will reduce labor monopsony, increase worker power, and bring the United States further in step with international rules and norms for employment contracts. The FTC’s analysis estimates that a ban of non-competes will boost workers’ earnings by nearly $300 billion per year. NELP fully supports a ban on non-competes and applauds the FTC in taking this bold step to protect workers,” said Farley.
BACKGROUND:
More than 30 million workers—at least 18 percent of the U.S. workforce—are required to sign non-competes as a condition of accepting a job. Non-competes, which were originally used in highly paid executives’ employment contracts, are now found in almost all occupations, including for sandwich makers, dog walkers, and hotel workers. Even workers labeled as “independent contractors”—who should have the freedom to work for multiple clients—are often required to sign non-competes that limit where they can work.
Employers often present non-competes as a “take it or leave it” contract, forcing workers either to sign or forego employment. Consequently, less than 10 percent of workers have any ability to negotiate these clauses, and 93 percent of them read and sign them anyway. In addition, 30 to 40 percent of workers are asked to sign non-competes after they have already accepted the position.
The FTC’s proposed rule to ban non-competes includes independent contractors, bans non-disclosure provisions that function as de facto non-compete agreements, and limits “training repayment agreements,” which have been used as “back door” non-competes that force workers to stay in positions to “repay” the employer for providing on the job training.
