Non-compete clauses are anti-competitive: Lina Kahn (FTC chair) in the NYT

 An op-ed this morning by the chair of the FTC explains her opposition to non-compete clauses in labor contracts (which are already non-enforceable in California), following last week's proposed Non-Compete Clause Rulemaking

Lina Khan: Noncompetes Depress Wages and Kill Innovation,  by By Lina M. Khan (chair of the Federal Trade Commission) Jan. 9, 2023 

"Noncompetes were long assumed to apply mainly to high-level executives with access to sensitive corporate information. But their use has exploded in the past few decades, extending far beyond the boardroom. Today, experts estimate that one out of every five American workers, or about 30 million people, are bound by a noncompete. Studies and media reports have found noncompetes routinely invoked against fast-food workers, arborists and manual laborers, to name a few examples. Just this week, the Federal Trade Commission, where I am chair, settled allegations against a company in Michigan that prohibited its workers — security guards earning at or near the minimum wage — from going to work for a competitor within a 100-mile radius of their job location for two years. 

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"over the past few decades, several states restricted the enforceability of noncompete clauses to various degrees, usually because of court decisions. This created natural experiments, allowing researchers to draw causal inferences about their impact.

"Their most staggering finding: Noncompete clauses systemically drive down wages, even for workers who aren’t bound by one. Every worker stuck in a job represents a position that isn’t opening up for someone else. And if employers know their workers can’t leave, they have less incentive to offer competitive pay and benefits, which puts downward pressure on wages for everyone.

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"the evidence to date suggests that noncompetes suppress wages, reduce competition and keep innovative ideas from breaking into the market. One study even found that noncompetes lead to higher prices for consumers by reducing competition in the heavily concentrated health care sector.

"Noncompetes are the type of restriction that Section 5 of the F.T.C. Act, a federal law passed by Congress more than a century ago, is supposed to prevent. That’s why the F.T.C. last week proposed a rule forbidding companies to subject workers to noncompetes. Under the proposal, noncompetes would be designated an “unfair method of competition,” which the law prohibits. The rule would apply to professions across the board — janitors, nurses, engineers, journalists. Because employers often try to use noncompetes even when they’re unenforceable, the rule would require companies to proactively notify employees currently subject to noncompetes that those restrictions are now void.

"People might worry that eliminating noncompetes would make it impossible for companies to hold on to their secrets. But there is good reason to believe that more-targeted alternatives, such as nondisclosure agreements and trade secret law, would get the job done without imposing such a burden on the economy."