Ayup. Seems the “JCs” want slaves, by closing off all alternate employment opportunities for anyone having any sort of skill or experience. I have read reports of fast food places forcing employees to sign a non-compete, so they can’t leave a Mickey D’s, for instance, to work at a better run, or better paying, Wendy’s down the street.
Steve
Younger person I was working with is well trained in dance. She signed with the local Fred Astaire studio. There is a non-compete. It is iron clad. She is locked in.
I will read the new rule in a moment. I look forward to seeing the rule.
I tried to put her in touch with a friend of mine who owns an independent dance studio. She would run ads and teach classes. She makes more money and has her freedom.
She loved my putting her first but she had already signed her contract.
I wonder it that has more to do with stealing clients. I’ve not read this new law but if it allows employees to leave and steal clients without recourse, then that will be problematic.
I see it in my industry all the time. Some competitor writes a six or even a seven figure bonus check to someone to change firms and bring all their clients with them. They might incentivize the clients by offering them a lower fee if they transfer. The current non-compete, while not perfect, helps reduce some of that.
This was headline news two days ago:
Snip:
That’s the worst I’ve ever seen,” says Roger Gershman, a recruiter and CEO of the Gershman Group.
…
five of the six departing teams share a common history: They all previously worked at First Republic Bank , which collapsed during last year’s regional banking crisis and was acquired by JPMorgan Chase.
Another story I read on this topic stated that they had a deadline of this past Friday to move to avoid some new non-compete restrictions.
Regardless, the total up front bonus for that transfer of assets to other firms may have been as much as $150,000,000 (or 1% of the assets moved). Bonuses can be as high as 300-400% of prior annual revenue.
Of course, the other side of the coin is people leaving a sinking ship. In 99, I was working in the Steelcase dealership department of an Office Depot warehouse. For the better part of a year, my coworkers were saying the word was on the street that OD was going to close the Steelcase dealership. OD management kept denying it. OD even flew a honcho up from HQ in Florida to deny it. Around August or September, OD was raided by another Steelcase dealer, who walked off with a couple salesmen and a couple designers.
A week before the end of December, the local OD management called an “all hands” meeting for everyone in the Steelcase department. In the meeting, we were told the department was being closed at the end of the month, we were all on the street. (ie, OD management had been lying to us for months)
So, were the salesmen and designers wrong in abandoning a sinking ship? If they had been bound by a “non-compete” clause, they would have had to ride OD into the ground.
Steve
Nail tech is pretty much an individualized service (like say haircuts). The customer is very much a client of the service provider rather than the company owning the facility.
It’s not really stealing if those clients were there for the particular individual.
Employee vs independent contractor?
As you say, it will all depend on how the law is worded.
I suppose another way of looking at it is to consider that businesses may be the ones stealing clients through non-compete clauses. When I find a good doctor, mechanic, barber, dentist, etc. - my loyalty lies with them, not who they work for. Prohibiting them to continue their relationship with me seems unfair.
The act of originating and completing a non compete is only the first step.
The actions of the FTC (even before they actually “acted”) have quelled activity (and lawyering) among those looking to enforce non-competes.
The industry has already reacted to reduce enforcement - even to the point of not going down the path when an instance is clear.
Non-competes are barely enforceable today. Even less so when the company who will burn legal dollars to enforce declines to do so.
In many ways, this is a result without any real action. Merely outward motions and intention has been sufficient.
I worked in a business with trade secrets. Employees who held high level technical positions quit for direct competition in the same area. Not a single one was issued more than an “official letter”.
None were sued. That costs money.
I go where the individual I prefer is available, not the firm. One orthopedic doctor was with different firms over 20 yrs until he retired (about 2020?). First doctor had been (extended) family doctor since about 1920. He retired 1970? Had one neuro doctor starting in 1976 or so. He retired in 2023 to do research.
Fun with dentistry. One dentist retired (private solo practice) after a few years. Another dentist (at/near retirement age) sold his established practice and got contract to do work for military in Germany, so had to find new dentist. The buyer of the practice moved the office and went bust a year or three later. She relocated to another area, more rural (?). Found another dentist for a few years, who left without notifying anyone (no idea why). Another dentist took over his practice and space and it has been good thus far. He is adding dentists and more treatment rooms.
The prohibition is not on the client but on the employee. Using my prior example, nothing keeps a financial professional from leaving a company and starting their own business. Nothing keeps a client from moving to that new business. What is generally prohibited is the professional contacting the client - for which the relationship (including personal contact data) is owned by the employer - and soliciting them to move, especially if they provide financial incentive to do so.
In the instances I mentioned, everything keeps the professional from leaving the company and starting - or working at another business, even if they are not in the same universe. (Behind the scenes producer of shopping channel, not allowed to work at a local retail jewelry store.) (Hairdresser, not allowed to tell customers where she has gone.) Cripes, there are stories where McDonald’s workers are not allowed to go across the street to Burger King. Does this employee have some secret sauce knowledge that’s going to set Burger King on the path to riches?
Again, at least in these small ball cases, the customer isn’t “owned” by the business any more than Kohl’s owns me because I shop there occasionally., This is madness.
And that’s why the new rule has an income cutoff ($150,000 I believe (could be wrong) to try to separate the expensive wheat from the cheap chaff. That may not work, dunno, but at least it’s an attempt. Below $150k, no non-competes. If there’s a better way, I’d love to hear it.
As for “it’s unenforceable”, nonsense. Just the threat is enough to keep employees in line. Any decent size business already has a law firm on retainer, it costs nothing to send a nastygram, and most low level people know that they do not have the resources to fight it - even if they know it’s wrong.
This is about pulling back some of the balance to the worker class from those owners who are only to happy to put impediments in the way of people finding better paying jobs, lest they have to (*gasp) pay people more themselves.
First of all, Thank you Ms Lina Khan, you are a breath of fresh air.
There are adequate protections available to the corporations to protect their trade secrets, patents, etc. Also they have ability to reward the employees to keep working for them. This is a much needed and kudos for bringing it.
Matt Stoller writes about the FTC ban.
FTC graphic estimates that banning non-competes will generate 17k-29k new patents, create 8500 new businesses, & raise workers wages.
18% of workers are covered by non-competes.
Non competes are unenforceable or restricted in many states, including California, Colorado, Illinois, Maine, Maryland, New Hampshire, North Dakota, Oklahoma, Oregon, Rhode Island, Virginia and Washington.
Of course, in the above states an employer can still threaten employees who do know the law in their state.
A law suit has already been brought against the FTC.
Update on “Bloody Friday:”
J.P. Morgan Securities has sued 16 former First Republic brokers as it seeks to force them to repay over $90 million combined tied to recruiting loans granted when they joined the failed San Francisco bank.
First Republic paid 16 people to move their business from some other firm to First Republic. That comes out to an average of nearly $6 million a person just as a signing bonus. Wow.
More:
The largest individual note balance mentioned in the lawsuit belongs to Brian J. Zakrocki, who received $29.8 million when he joined from Goldman Sachs in 2020 and another $3.4 million loan in February 2023. Just over $28.2 million of that was still outstanding, according to the complaint.
You KNOW what ever firm they all went to when they left JPM paid them again. Crazy.
Judge Tosses FTC Ban on Noncompete Agreements
https://www.wsj.com/us-news/law/judge-tosses-ftc-ban-on-noncompete-agreements-ae517b48?mod=hp_lead_pos5
A federal judge in Texas on Tuesday struck down a landmark regulation issued by the Federal Trade Commission that sought to ban employers from using noncompete agreements to prevent most workers from joining rival firms.
U.S. District Judge Ada Brown ruled that the commission’s authority to police unfair methods of competition couldn’t be used to issue substantive regulations that ban an entire category of conduct.
DB2
Apparently fast food places in Michigan don’t enforce non-competes on their burger flippers. I stopped at Wendy’s around 2pm today. About 8 cars lined up at the driveup, None parked next to the dining room. I didn’t even bother parking. Pulled up to the dining room door and gave it a tug. Locked. Probably only two people working in the store. Went down the block to Arby’s. About five staff working. No huge line at the drive-up. Dining room open, and no line there either.
All hail the 'JCs". We must give all power to the “JCs”. Because the rest of us are nothing, unless we work to advance and enrich the “JCs”.
/sarcasm
Steve
Steve, unless you’re born independently wealthy it seems you have two choices – work for a “JC” or become a “JC”. Well, you could also opt for a life in prison or on welfare. It appears you are unhappy with the choices you made in life.
DB2
Of course, you are missing the point. There is a difference between working to live and living to work.
Are you casting me in with the “bitter cat ladies”? lol
Steve
I need some clarity about what you are saying. Are you saying that Wendy’s is run by JCs and therefore don’t hire enough people and therefore their dining room is closed. And that Arby’s isn’t run by JCs and therefore hires enough people and therefore their dining room is open? Or vice versa?
Judge Ada Brown sounds like a real jerk off. If quit a job so you can’t have another job unless your former employer says it is okay?
This sounds like JC heaven.
The judge said the FTC needed to be more specific.
https://www.msn.com/en-us/news/us/us-judge-strikes-down-biden-administration-ban-on-worker-noncompete-agreements/ar-AA1p8FDO?ocid=BingNewsSerp
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 non-compete 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, render the Rule arbitrary and capricious,” Brown wrote.
DB2