Jan 20, 2023 - Economy

The public takes aim at "un-American" noncompetes

Illustration: Sarah Grillo/Axios

Since the Federal Trade Commission proposed banning employers from using noncompete agreements just over two weeks ago, more than 4,400 comments have rolled in from the public on the government's website, many supporting the move.

Why it matters: It's likely the FTC's ban will get watered down, delayed, or even tossed out in court. Yet the proposal has revealed deep dissatisfaction with noncompetes among American workers, and some employers are taking notice.

  • Regardless of where the ban lands, some companies are starting to think about noncompetes differently, with some looking at alternative strategies, said Mike Schmidt, a partner at Cozen O'Connor.
  • There's "growing hostility to the idea that there should be those kinds of restrictions, and it's changing the environment that employers have been comfortable with in the last number of years," an employment lawyer told the Wall Street Journal earlier this week.

What they're saying: Axios read through many comments on the government website: We found just one opposing the ban, which would prohibit companies from requiring employees to sign away their right to work for competitors in a certain industry for a period of time.

  • "There is something distinctly un-American about baring individuals from liberty and the pursuit of happiness by limiting economic opportunities to whatever company a person happens to work for at the time," reads one comment.
  • Others called these agreements "unjust" and "unfair."

Of note: In the comments and interviews with Axios, doctors, in particular, say noncompetes hurt their careers and their patients; plus, they're fueling the current physician labor shortage.

  • About 45% of primary care physicians are bound by noncompetes, one survey found. And they're prevalent in large medical systems. Typically, they prohibit physicians from practicing medicine within a certain area, which means doctors can't take a new job where they live — unless they wait for a year or two (usually without getting paid).
  • "Most people don't want to relocate," a 32-year-old doctor in Philadelphia told Axios. "The agreements wind up forcing a lot of folks away from medicine," he said, noting many of his former colleagues have gone into IT or consulting.
  • "I have had to move 3 states in 10 years due to this archaic practice," a physician says in a public comment.

Meanwhile: In recent years, more states have moved to restrict the use of noncompete agreements — particularly for lower wage earners. But that's made it harder for some companies who are trying to hire workers for remote positions around the country, said James Daire, associate director of legal at Yelp, which supports a nationwide law.

Headquartered in California, Yelp recently faced this issue head-on when the company tried to hire a Washington-state-based executive away from Chicago-based Groupon.

  • California and Washington restrict noncompetes. Illinois does not.
  • So Groupon filed suit against its former employee in Illinois.
  • The upshot: The executive couldn't take the new job.

The other side: Companies say they need these agreements to keep former employees from spilling secrets, and that they promote innovation. The U.S. Chamber of Commerce says that the FTC simply doesn't have the authority to do this.

What's next: The FTC comment period ends in March. The Chamber said it would go to court if necessary to block its implementation.

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