Corporate America has just lost one of the most powerful tools to keep people from getting better
jobs non-compete agreements that ban workers from finding a better job have been used to keep
wages low and even if you have never personally signed one of these agreements they will almost
certainly still be hurting you late last month the FTC banned these deals from being put into
contract for most employees and most existing non-competes will be phased out over the next
3 months unless you run a business that relies on keeping employees in bad conditions for poor
pay this ruling will be good for you but that doesn't mean that Corporate America is going
down without a fight welcome back the Federal Trade Commission has just voted to ban almost
all non-compete agreements between companies and their employees that new ban also applies
to any existing noncompete agreements hey Tony good morning the Federal Trade Commission wants
it make wants to make it easier for you to get final rule that would in effect ban most
businesses from using non-compete clauses uh in hiring a non-compete Clause is a condition in a
contract which bans an employee from working for another company for some amount of time after they
quit or get fired from their current position companies claimed that these terms were very
important because they didn't want to spend their time and money training staff and giving them
proprietary information just for them to get a job with their competitor and take all that valuable
information over to them to play devil's advocate for some employees this kind of makes sense high
level company Executives R&D staff and even sales staff might have company information that would be
valuable to a competitor and detrimental to their business if they got out if the CFO at a company
got a job at a competitor and they knew that their old company was having cash flow problems their
new company could use that information to run them out of business sales staff could also call up all
of their Client List and bring them over to a new company since they know the exact details of Deals
they were getting with their old company spoiler alert for a 20-year-old show but Michael Scott
wouldn't have been able to start Michael Scott paper company which nearly put his old employer
out of business if he had signed a non-compete agreement Scott knew his old clients and how
much they were paying for their paper so he was able to undercut his old company by calling them
up and giving them a better deal this was good for the customers and good for healthy competition but
it wasn't good for the large incumbent Dunder Mifflin who got out competed by a smaller more
efficient operation businesses have argued that they can't operate if they have no legal means
to protect their valuable information they have also said that without non-compete agreements
their competitors could free Rite off them by just poaching their staff after they have made
the investment into hiring and training inexperienced workers the Federal Trade
Commission and its controversial new chair Lena KH have basically called this out as complete [ __ ]
in their announcement of a stop of non-compete agreements being put into employment contracts
the FTC also said that even if this does hurt some big businesses that's actually a good thing the
Freer riter argument really doesn't work because those businesses could also attract their own
Talent from their competitors too all they need to do is give their employees a more attractive job
offer and most people are happy to switch jobs if people do take company information with them
the FDC argues that the only group this is bad for is a company that doesn't want to compete
companies also don't need non- competes to protect themselves from people taking their intellectual
property Patent Trademark and Industry secret laws already exist and non-disclosure agreements
where previous employees can't legally disclose information about their previous employers are
still totally enforcable dund Mifflin was a work of fiction but many real companies are
forced to offer better services at better prices and pay their employees more competitive salaries
because an ex-employee of theirs learned about their industry and started a better firm with
the experience they gained working for their old employer most successful companies are started by
people who were previously employees working for a company in the same industry Gary tan the CEO
of Y combinator an early stage startup incubator has said that the best companies he deals with are
one started by people who first gained experience in the industry they want to disrupt by working
in it the Federal Trade Commission estimated in the report that this new rule will lead to the
formation of at least 8,500 extra businesses every year and between 177,000 and 29,000 new patents
every year according to the organization's research these are all being blocked because
people aren't legally allowed to innovate or start a business the only people that lose
in this situation are the companies that don't want to compete which is why it's the FTC not the
Department of Labor that made this ruling the FTC is normally the organization in charge of making
sure that businesses aren't forming monopolies it does this by blocking mergers or Acquisitions
that would give the new Mega corporations too much power in the last 3 years the FTC has been trying
their best to stop some large company mergers but they have so far lost all of the recent cases in
court allowing the mergers to go ahead the FTC can also break up companies that have too much
Market power but it hasn't done that in over 40 years so what the FTC really does most of the
time is make rulings like non-compete agreements being a form of anti-competitive practice which is
illegal you wouldn't think that this would be a hard case for them to make since the words
non-compete are right there in the name but the FDC is already being sued over this ruling by an
industry body representing companies but let's be honest with one another even though the companies
and the FTC won't admit it non-compete agreements were never about competition between one company
and another it was about competition between a company and its employees so it's time to
learn how money Works to find out how this ruling could change the job landscape and the loophole
that companies will use to undermine it this week's lesson is sponsored by brilliant
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full 30 days visit brilliant.org how many works or click the link in the description you'll also get
20% off an annual premium subscription the real reason that non-compete agreements have become
such a big issue in America is because they are not being used as they were originally intended
stifling Innovation and making it illegal for talented people to start competing companies was
already pretty bad but companies just started using these contracts to trap their employees
in bad jobs according to research done by S&P Market Intelligence on 67,000 workers one in
six service workers in the fast food industry had a non-compete agreement as part of their contract
fast food workers have no valuable company information and they don't pose a threat to
revenue nobody is going to stop eating at Five Guys and go to Chick-fil-A just because Freddy
the Fred guy changed jobs what it does though is make make it very hard for minimum wage workers to
find another job that they have experience for so even if they could earn more or if they are
being asked to work onfair conditions they can't quit because they are not allowed to work anywhere
else giving fast food managers that much power over minimum wage staff has not only cut down on
wage growth for the people that need it the most according to the FDC it's also created unsafe
working conditions enabled wage theft and made career advancement slower because nobody dares
to complain workers making lower incomes were also found to be the ones least likely to argue against
the inclusion of non-compete agreements in their contracts because they were afraid that they would
lose a job offer they desperately needed at the time it might sound bad locking people with the
least negotiating power into bad jobs they can't escape from but non-competes have actually been
used to control a group that gets even worse than this a report by John's Hopkins University found
that 45% of vital healthcare workers doctors nurses and support staff are employed under
a non-compete agreement doctors are required by law to share any information pertaining to their
patients health with other licensed providers provided the patient provides consent and
training is based on industry standards so the only reason that hospitals are doing this is to
lock in the staff they have at a time where there is a desperate shortage of medical workers in
the country doctors practicing in a hospital are highly likely to start their own practice as part
of their natural career progression a non-compete can potentially stop that making clients go
through the hospital to deal with the doctor of their choice that's not only bad for doctors
and nurses who could find better jobs or start their own business it's bad for for you the FTC
estimates that providing more competition in the medical industry and encouraging more businesses
with less overhead to enter the market medical costs can be reduced by as much as $194 billion
over the next decade now even if you aren't under a non-compete agreement these deals are pushing
down Market rates for most jobs especially those in Industries with a lot of worker competition the
FTC estimates that typical workers will earn an additional $524 a year after this change whether
or not they had a non-competing place it should also make finding a job easier because companies
won't be able to hold their employees captive in their positions which means they will need to
hire more often that's really what companies are angry about even if they won't say it out loud but
don't get too excited yet because these companies still have a few Loop Pooles to fight back with
most non-compete agreements would be extremely hard to enforce already but for a minimum wage
employee between jobs the threat of expensive legal action with big fancy sounding contracts
was enough to keep them in line companies will easily be able to find other conditions that
achieve the same thing already 95% of employees who have a non-compete agreement in their contract
also have a non-disclosure agreement in their contract which employers could use to make the
same kinds of threats the FTC warned employers that make non-disclosure agreements so broad
that it would prevent their employees from getting another job that it will be counted
as the same kind of non-competitive practice but that still requires a regular employee to file a
legal complaint against their employer which let's be honest not many people are going to do company
could also do something even more Sinister and make contracts with each other in so-called non-p
poach agreements that cut out the need for any formal agreement with employees at all according
to the legal firm Schneider Wallace a no poaching agreement is when two or more companies come
to an agreement to limit hiring of each other's employees the agreement is to not poach employees
of the other firm in exchange for the same not happening to their employees these Agreements
are usually deemed anti-competitive and illegal but they are incredibly hard to find especially
in Industries like fast food where handshake deals can be made between local franchise owners
even if these practices are investigated the fines to settle the case are usually less than
the cost of paying employees competitive local rates so it can be written off as the cost of
doing business companies can also maintain any non-compete agreements they have with senior
executive level staff just to make sure that every company in America didn't conveniently promote all
of their staff to the level of senior executive cashier the rule only applies to staff that earn
over $150,000 in the previous year and who are in genuine policy-making positions employers can't
add new non-compete agreements to these employees but they are allowed to keep the existing ones
in place which means if the ruling is enforced eventually someone is going to be the last person
in America working under a non-compete agreement but that's if all of this actually happens the FTC
can make rulings about what it's going to enforce but it's still up to the courts to decide what
is legal or not according to the law the FTC has unsurprisingly already been sued by the US chamber
of Commerce and a few other businesses around the country that are arguing that this ruling
is not legal according to any existing federal law the FTC has been on a bit of a losing streak
with its big legal battles so while this ruling is definitely worth celebrating businesses still have
a hope of getting their way now in the spirit of empowering workers who actually make the business
function instead of promoting our newsletter or another one of our videos I want you to all go
and watch story jerk a writer that has been on my team for over a year now made his own channel
to talk about the art of Storytelling and it hasn't really taken off yet which is a shame
because he's incredibly talented so if you're interested in film I am going to link you to one
of his best videos to show you that empowering people who work for you is always better than
controlling them but please make sure to like And subscribe to keep on learning how money works