In a win for labor, the Federal Trade Commission has proposed a ban on
what is commonly referred to as noncompete clauses for employment.
Which prevent workers from leaving their job to start working at
a rival business or taking a job with a competitor.
Now, the use of these noncompete clauses has expanded in recent years and
has been implemented in cases where it makes absolutely no sense.
So if you're working, let's say for some sort of tech company where there
is proprietary information that you could actually take with you and
use against the company with a competitor that you're now working for.
I think noncompete clauses might make sense.
But when you're a fast food worker and a noncompete clause prevents you
from working at, let's say a different McDonald's that might pay you more.
Then obviously it doesn't make sense and
intentionally prevents you from increasing your wages and the money you could earn.
Now, the FTC announced the proposal last Thursday, notice,
it didn't get much attention, but I'm glad we're talking about it now.
Here's why the band would actually help workers out.
Okay, studies show that noncompete which appear to directly affect roughly 20 to
45% of US workers in the private sector, hold down pay because
job switching is one of the more reliable ways to secure a pay raise.
Many economists believe that they help explain why pay for
middle income workers has actually stagnated in recent decades.
Although let's keep it real, they've also stagnated because worker unions and
things like that have decreased.
And so, with less bargaining power,
it's gonna be a lot more difficult for you to increase your wages.
I wanted to make sure to mention that, cuz it's not just about noncompete clauses.
Other studies show that noncompete protect established companies from competition
from startups and so, reducing that competition is a huge problem as well.
It gives the consume or less options and
the arrangements may also harm productivity by making it hard for
companies to hire workers who best fit their needs.
So, I think the FTC is making the right proposal here,
John what are your thoughts?
>> Yeah, I liked, I don't know if it was last week or whatever they had that
judgment against, I think four companies for the noncompetes that they had had.
That was a good sign,
this is obviously gonna affect former workers if they get it done.
Yeah, it's a reminder.
I'm glad that you mentioned the unions, the reminder that labor rights is
a complex thing that involves a lot of different issues, not just pay,
it's not just benefits, it's these sorts of things too, arbitration, all of this.
And it's a reminder that the past progress in some cases,
it takes individual workers organizing their own workplace.
In some cases it takes hopefully getting the right people in positions of power
to appoint people to organizations like the FTC.
And hope that that will point them in the right direction and
pay dividends over time.
>> Exactly, now,
I'll give you some evidence to why this is such a great idea the proposal, I mean.
So according to a 2019 study from the Economic Policy Institute,
they do great work, more than a quarter,
29% of responding establishments where the average wage was less than $13.
Can't even freaking believe this used noncompetes for their workers.
It's just their way of controlling wages, they found a roundabout way to do it.
Here's an insane example from a complaint
that the FTC filed last week against Prudential.
The two affiliated Michigan based companies and their owners Greg Wier and
Matthew Keywell exploited their superior bargaining power against low wage
security guards requiring them to sign contracts containing restrictions.
Get this, that prohibited them from working for
a competing business within a 100 mile radius of their job site
with Prudential for two years after leaving Prudential.
>> Had they been to trained in proprietary martial arts techniques or something?
Of course not.
>> Yeah, now, this is just BS.
As you said, it's it's one way of sort of second hand controlling wage growth, but
it's also to lockdown workers, you don't want them transitioning.
And when I try to think about like- >> Turnover,
right, cuz turnover look- >> Most certainly complaining a lot about
it recently.
Yeah, exactly, if you're a worker and you feel like, okay,
I don't like these working conditions.
I feel like I'm being taken advantage of, I want to move to a different company and
let's say you're a security guard, that's what you do, that's what you're good at.
Based on what Prudential did here,
you can't go be a security guard within a 100 mile radius.
So, it prevents unhappy employee from leaving.
>> Yeah, for years, I think about how I was a waiter through college and
through grad school.
Imagine if there had been noncompetes on you can't take a different waiting job or
something.
>> Insane.
>> Yeah, I guess I just didn't think of it, cuz they could do something like that.
No, it's inherently anti-worker.
There are some cases where it makes sense in tech companies,
some sort of security maybe.
But the vast majority of workers, it makes no sense whatsoever,
except from the point of view of the owners.
>> And by the way,
there are fines that come along with violating the noncompete clauses.
So in the case of Prudential, it required employees to pay $100,000 as a penalty for
any alleged violation of the because the FTC noted.
So look, I like that there's some positive movement happening in the country
when it comes to labor rights, whether it's workers organizing their workplace.
I think the Biden administration's, National Labor Relations Board has been
pretty good, especially relative to previous administrations.
And now we're hearing some good news from the Federal Trade Commission.
Great, so this doesn't just happen out of nowhere,
it happens when workers really start to take their power back.
Let's keep that going, it's good news overall.