FTC Proposes Ban on Non-Compete Clauses in Employment Contracts

The FTC proposed a rule to ban all non-competes, even those already in contracts, saying it undermines economic liberty and a person’s right to switch jobs.

If the above goes into force employees are removed from serfdom; innovation takes off as do wages. So a plus of increased economic growth and a minus of inflation.

So what did I miss?

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Well it’s not really inflation. Uncle Milty Friedman maintains inflation is a currency problem. Prices rising to meet conditions is just what you might call “right pricing.” I know however, that people do have differing definitions of inflation. You could say that thus far wages and innovation have been suppressed thus dampening the true price of things. Why call it inflation?

I AM glad to see this. I knew certain jobs have always had these clauses. usually show biz and sometimes athletes. They are a single, unique entity with celebrity and unique market characteristics. The weather guy on ch 6 here was let go and he ended up on channel 3 but he had to be off the air for 6 months before he could appear on ch 3 as part of his contract.

I was not aware that hamburger flippers and such were chattled by such contracts.

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In the chemical industry you have many formulated products like paint, cosmetics, flavors and fragrances, metal working fluids, drilling fluids, textile mills, etc, etc.

It is common for a top salesman to partner with a chemist and make a deal with a major customer to start their own company. Non-competes are often used to block that. They force you to move to a new territory to start your new company.

Loss of this protection is potential disaster for many companies that supply such products. Price cutting is the likely result. Reduced costs for many industries but also little companies likely to fold. Lots of unemployment to follow.

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Silicon Valley is a competitive industry — so competitive that some workers find themselves at the mercy of non-compete agreements that their employers made them sign.

Non-compete agreements prohibit employees who leave their jobs from taking similar positions with potential competitors for a certain period of time. In the U.S., somewhere between 27.8% and 46.5% of private-sector workers are subject to non-compete agreements, according to a 2019 Economic Policy Institute study.

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I would suppose some if not most of formulated products might have a patent.
I would also suppose a “creative” chemist could copy a product with very minor changes then calling it a new product. The pharmaceutical corporations do that with drugs about to have their patents expire. A little reformulation and viola an extended patent period.
https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2022.00374?journalCode=hlthaff
Recent studies have examined strategic behaviors in the pharmaceutical industry that extend patent and regulatory protection, known alternatively as “lifecycle management” or “evergreening.” This literature highlights the extent to which the patent system is increasingly focused on granting new protections for minor modifications of existing innovations.

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Absolutely not true. Patents last only 17 to 20 years. Some formulations have been around for eons. They are protected by trade secret law. But “everybody” has the same formulas. No secret ingredients. So anyone can buy the same ingredients mix them in a bathtub and sell them.

Yes, it would be nice if innovation created new formulations that everyone had to have. But far more likely the company has been using this stuff for years, it works fine and they see not reason to change. Change is actually difficult because their customers might have to approve the change and that takes more manpower and adds risk.

Most of this business is based on long standing personal relationships with suppliers. The next order is not for sale. But a low price from a salesman they like and trust can get the business.

Such is the real world of industrial chemistry.

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You have a good sense of humor. Friedman with all of us understudies in academia was lazy. He never measured anything. While some times monetary is over done and causes inflation Friedman wanted the US to depend on monetary policy instead of fiscal policy. Odd for a man against monetary policy that to him only causes inflation that he hates.

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Yes indeed. The POTUS started to move the ball on that a year ago. But yes, historically, a burger flipper at Micky D’s was prohibited from taking a better opportunity at Wendy’s…because forcing a “JC” to compete for workers is a “burden”.

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ah one of the roots of service inflation…JCs thinking they need to hold onto people from switching jobs…I call that a free market. JCs call that unfair competition?

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The current “JC” narrative is “no-one wanna work”.

Steve

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This is one of those things that may be true in theory, but essentially meaningless in reality. 99% of the time, the former fast food employer has no idea where the employee went to work. In fact, 25+% of the time, they don’t even formally quit, they just stop showing up.

Most fast food workers probably work close to home, and, if change to a competitor, the competitor will probably be close by. A really vindictive “JC” could snoop around at nearby stores and see if they recognize the former employee’s car in the parking lot. Of course, the employees that do give notice, will be asked “going where?” If they are naive enough to answer, truthfully, they are taking a supervisory job at another burger place, as a for instance, the “JC” can remind them of the non-compete clause, and threaten prosecution. A lot of young, low wage, people can be easily intimidated. Read up on how Cumberland Farms extorted money from it’s employees.

Steve

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They could, but they won’t. First of all, they have a business to run. Second of all, the JC is not always local, very often there is a salaried manager, and hourly employees at the place. Thirdly, for franchises, the JC typically owns a few of them and manages them remotely via each store manager. Fourth, the JC that actually has to go on site and do some real work, even just staking out the competitors parking lots, gets very annoyed. The whole reason they want to be a JC in the first place is to avoid that kind of “real work”!

The vindictive “JC” orders the store manager to snoop around, without pay. “If you won’t do it, I’ll find someone who will”. That’s even easier that the “JC” doing it himself, with the implied threat that if the manager doesn’t find where the employee went, on his own time, he loses his cush 80hr/week, barely better than minim wage, “job”. And if he applies at another food place, and the place calls for a reference?

Steve

I agree that that may have worked 3 years ago. Maybe. But today I doubt the JC would do it anymore. That’s because there is a grave danger that the manager will get annoyed, quit, and go work for the spiffy new BurgTacSushAsiaFusion place opening down the street. Then the JC is in deep doodoo because it’s hard to find a new manager and train them, and in the interim, the JC may have to do a bunch of “real work” on-site, everyday from early lunch through end of dinner cleanup. And that is anathema to a true JC!

It seems that “references” suddenly aren’t a big thing anymore when you can’t find employees or managers in a timely manner.

Burger joints probably work the same way Radio Shack did: have a constant flow of “manager trainees”. If you saw anyone, other than the manager, in an RS full time, he was almost certainly a “manager trainee”. When RS “management” in Fort Worth decided to make sharp cuts in store manager’s pay in 89, most of the store managers in the district quit, within the space of a couple months. Didn’t upset anything one bit, as the “trainees” were promoted. Being newly minted managers, the recent “trainees” could be suckered along with big promises and assurances, as they worked those 80 hour weeks, for 50 hours pay.

Steve

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It seems to be slowly shifting to they are too expensive. Which would be followed by how do we bring our costs into line with expectations?

They wont for another bigger reason. If they do you wont come back to them later. They need labor. Shooting down workers right now is not their intent. The JCs will be happy for you. And if you want to return they will be even happier to take you back.

But Steve is actually correct. Just burger places are not the issue. Apple does this sort of thing in its stores. Apple will back it up.

This goes to IP as well. One of my partners is an artist who thought of working in an Apple store locally. The money was not enough but the agreement that Apple would own your IP was impossible for him.