Is this the end of non-compete contracts?

The US Federal Trade Commission wants to ban non-compete agreements. That's a great idea in my book.

Well, I didn't see that coming!

The US Federal Trade Commission (FTC) recently proposed a regulation banning employers from imposing non-compete "agreements" on their workers.

That works for me. I've had to sign non-competes over the years, and I've never liked it one damn bit. Every last one of them overstated what I'd be restricted from doing.

Almost all forbade me, as a freelancer, from working for other publishers. For a writer, that's impossible. So I usually write for three to six publications at any given time to keep body and soul together.

Almost no one ever pays me enough for me to consider working for anyone full-time.

So, whenever I get a contract demanding I only work for X publication, I cross those clauses out. Usually, I get no pushback. Usually.

I ran into the same thing with full-time jobs. Before turning most of my efforts to writing, I worked as a programmer, system administrator, and network administrator. Every lousy time, my employment contract would insist I couldn't program or what have you for about a year after I left my job.

Come on! I was a developer. If I couldn't write code, what else would I do? Flip burgers at McDonald's? I think not.

The FTC summed up my feeling about non-compete clauses.

It called them "a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses." Thus, the Commission concluded, "By stopping this practice, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans."

That, by the FTC's count, is one in five Americans. So it's not just tech or highly skilled jobs getting hit.

As the New York Times pointed out, it also includes sandwich makers, hair stylists, and summer camp counselors. So yes. Seriously, there are non-competes for teenagers working as counselors.

Don't ask me what serious business secrets their employers are protecting — the right way to sing Kumbaya?

Sure, there are reasonable exceptions. For example, if I leave your company, I have no problem agreeing that I won't reveal your secret sauce to a competitor or use it in my own business.

But the FTC isn't talking about getting rid of non-disclosure agreements (NDA)s — unless these NDAs are written so broadly that they act as de facto non-competes. That's a different and uglier story.

I see NDAs all the time. They're part and parcel of my world as a technology journalist, and I have no trouble with them when they're rational.

But, telling me, as one did recently, that I couldn't write about artificial intelligence (AI) and search for a year if I was granted access to this one white paper, was nuts. (And so would be a contract telling an AI developer they couldn't work on AI if they worked for this company.)

While proprietary business information and technology secrets are what people often think about protecting with non-competes, that's often not the case.

Instead, it's all about making sure your workers can't leave. For example, the US fast food chain Jimmy John's used to forbid its sandwich makers from joining similar businesses within two miles of its stores for two years. The courts finally forced the company to drop that non-compete clause.

Ridiculous demands like that underline the real purpose of most non-compete agreements: keeping workers by hook or by crook for the least amount of pay.

As FTC chair Lina M. Khan said, non-compete agreements block "workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand."

Khan's right. Over the years, I've found that I never got significant raises. So the one option I had to make more real money was to switch jobs. That's not just me. It's everyone.

I've never asked employees or contractors to sign a non-compete agreement in my own businesses, and I never will. But, if your business does, think long and hard about the message you're giving workers.

If you want happier, more productive staffers, don't handcuff them to your company with non-compete agreements. It never ends up well for anybody.

Copyright © 2023 IDG Communications, Inc.

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