Good riddance to non-compete clauses

When people are hired, their contracts can sometimes include what are called non-compete clauses. These were originally designed to prevent someone from learning trade secrets at one company and then switch to another company or start their own business using that knowledge to the detriment of the original employer. As you can imagine, the only people who are likely to know valuable insider information are high-level employees. But companies realized that they could use those clauses to keep many more of their workers captive and started extending the clauses to cover lower and lower level employers, thus preventing them from finding better jobs.

Now the Federal Trade Commission under the admirable leadership of Lina Khan has forbidden the use of such clauses for all but top-level employees. As Kevin Drum says:

The vote was 3-2 in favor of banning noncompete agreements for new workers and voiding them for all existing workers (except C-suite executives). This will eliminate the ridiculous practice of fast food chains hiring sandwich makers and then prohibiting them from quitting and going to work for a different fast food chain—and giving their valuable, proprietary sandwich making expertise to the competition.

Corporate America has only itself to blame for this. Noncompetes used to be limited to high-end jobs like coders or lawyers. But then, as usual, some bright boys got the idea of expanding the idea to poor shlubs working minimum wage jobs. That was outrageous enough that it finally produced support for killing noncompetes completely.

A Labor Department study published in June 2022 estimated that 18 percent of Americans are bound by noncompete agreements, while other research suggests it could be closer to 50 percent. They are used in a wide range of industries, including technology, hairstyling, medicine and even dance instruction, while imposing restrictions on both high- and low-wage earners.

The FTC estimates that banning noncompete agreements could create jobs for 30 million Americans and raise wages by nearly $300 billion per year.

All good free-market capitalists—as opposed to those who are merely shills for big corporations—should be happy about this. The United States will do nothing but benefit from it.¹

Apparently California banned these clauses over a century ago and and despite that has had a booming economy.


  1. ardipithecus says

    Most likely, corporations doing this will keep on doing it and file lawsuits against the FTC; and appeal every adverse decision all the way to SCOTUS. In he mean time, just in case SCOTUS rules against them, they will continue lobbying (read: bribing) state legislators to keep relaxing child labour laws. Gotta open up the labour market to them avid, starry-eyed 8 and 10 year olds.

  2. flex says

    “free-market capitalists”

    Contradiction in terms.

    It is becoming more and more clear that capitalists are against a free-market.

  3. JM says

    @2 flex: This is why government regulation is so important. Free markets doesn’t mean freedom from government regulation, it means freedom to buy and sell as an agent chooses in a fair and open market. Free markets actually require government intervention.
    This has been understood from the beginning. Adam Smith actually writes about it in Wealth of Nations. Government imposed monopolies were common in his day and he saw that capitalists often sought to get control of these monopolies. Modern American investment capitalists have just intentionally forgotten this less despite praising Adam Smith in theory.

  4. xohjoh2n says

    Corporations’ next move: all employees will henceforth be classified as C-level executives! (No, that doesn’t come with a pay rise. In fact some sources say that an improved job title can provide mental health benefits and might itself be worth money which we will of course adjust your existing pay for…)

  5. lanir says

    Temp agencies used to use noncompetes for every job. That way they could squeeze their employees if their client tried to screw them over. It was how they suckered in shady corporate clients.

    Still remember one set of scumbags about 15 years ago tried to hire me away. One temp agency lost the contract with their now ex-client and an even shadier one stepped in. The new one asked me to ignore the old non-compete but sign theirs which included 25% of my 1st year of pay if I violated the noncompete. Probably unenforceable but I told them to pick one, they either didn’t believe in noncompetes and I should start work with them WITHOUT a new noncompete, or they did believe in them and I should tell them to do some anatomlically unlikely things with themselves.

    As I predicted they would, they didn’t choose to get rid of the noncompete. But seeing that let me understand where the corporate perspective on noncompetes really was.

  6. Katydid says

    As far as I know, I never worked for a company with a non-compete, but I’ve interviewed for several that wanted me to sign *in the interview* that anything I created--even on my own time--and any patents I got--even if it had nothing to do with my job--automatically belonged to them. One company in particular got really pissy with me that I wouldn’t sign that paperwork IN THE INTERVIEW, when I wasn’t even sure whether or not I wanted the job they were offering. Why would I want to sign such draconian forms if I wasn’t even going to take the job they offered? I wondered how many people didn’t accept the job and found themselves sued 10 years down the line for possession of some bit of code they’d written on their off time for their own benefit.

  7. Deepak Shetty says

    Noncompetes used to be limited to high-end jobs like coders

    As someone who still codes , the surefire way to sink my company’s competitors is to leave my company , take its code with me and manage to dump it into the competitors system. Im sure my company’s competitors coders also think likewise!

    Apparently California banned these clauses over a century ago

    In 2008 , on an H1B visa -- I was contracted out to a client in California and the client offered me a permanent job (after 18 months as a contractor via the contracting agency). Most contracting agencies have a clause that, that is a no -no -- you cant join the company they contracted you out to. When I pointed out that California laws state that you cant deny employment opportunities to anyone , the response was a) They’d file the case in their state of Incorporation (rarely California) b) Maybe I’d win the case but did I really want to go to trial?. In this case though it was more of precedent rather than non-compete.
    So in the end I had to pay them a fee to get a clean release , even in California. Most people cant afford to fight a company.

  8. Trickster Goddess says


    How does that even work contract-wise? From my dim memories on the unit I did on contact law way back when, a valid contract requires an exchange of value. If they are demanding rights to anything you ever create, what value are they giving in return? Surely a simple interview wouldn’t qualify.

    When it comes to non-compete, they should have to pay a stipend for every year you are no longer working for your original employer but prevented from working for their competitors.

  9. Katydid says

    @Trickster Goddess, the only explanation I can come up with for signing away your right to owning any patents or ideas you come up with is that they want you to sign the paperwork during the interview because they want you to assume they’re offering you the job. The “we own your thoughts” paperwork was only a small part of all the paperwork they want you to fill out. Other paperwork included your SSN for them to run a credit check on you *before you are even offered the job*. I always refuse to fill out any of that: I am in an in-demand field and don’t have to take a job I don’t want, and I never want to work for a company that would treat its employees that way.

  10. anat says

    I’m in molecular and cellular biology and work for a non-profit research institute, so that might explain my different experience, but I started working at this organization as a temp, via a temp agency, and was later hired by the same organization. In fact, I recall temp-to-hire being a common class of positions at that temp agency. It was an agency that specialized in biomedical research jobs.

  11. says

    IANAL, but it seems to me that noncompete clauses are a bit superfluous and unnecessary. Most companies already stipulate that anything you invent or create pursuant to your job, while using company resources, is always company property anyway. And bringing such information to another employer is already considered copyright infringement or theft of company intellectual property. So why the fuck do companies need noncompete clauses in addition to all that protection they already have? If they’re requiring them for menial jobs like burger-flipping, that suggests pettiness and spite, not a serious measure to protect anything of value.

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