Full text of the ruling here:<p><a href="https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf" rel="nofollow">https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule...</a><p>It's not surprising after thinking about it for a minute, but it did startle me to read that the FTC measures innovation by the number of patents issued.<p>> <i>In addition, the final rule is expected to help drive innovation, leading to an estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years under the final rule.</i><p>I've always thought of that as representing a stifling of innovation.
With respect to garden leave agreements, as noted previously, commenters used the term “garden leave” to refer to a wide variety of agreements. The Commission declines to opine on how the definition of non-compete clause in § 910.1 would apply in every potential factual scenario. However, the Commission notes that an agreement whereby the worker is still employed and receiving the same total annual compensation and benefits on a pro rata basis would not be a non-compete clause under the definition,350 because such an agreement is not a post-employment restriction. Instead, the worker continues to be employed, even though the worker’s job duties or access to colleagues or the workplace may be significantly or entirely curtailed. Furthermore, where a worker does not meet a condition to earn a particular aspect of their expected compensation, like a prerequisite for a bonus, the Commission would still consider the arrangement “garden leave” that is not a non-compete clause under this final rule even if the employer did not pay the bonus or other expected compensation<p><a href="https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf" rel="nofollow">https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule...</a>
This seems incredibly important. I know non-compete rules personally held me back at a previous tech job.<p>I'm interested to see how this hits finance firms – I know people who were forced to take a year off between jobs (although they were compensated the whole time). Always thought that would be a pretty sweet deal.
The rule goes into effect 120 days after it gets published in the federal register, and at which point all previous non-competes are unenforceable EXCEPT for senior executives.<p>Senior executives cannot enter into new non-competes though.
My attorney friends tell me that the FTC doesn't really have the ability to do this, since contract law is part of state law. (My poor paraphrasing, not theirs.)<p>I've been surprised I haven't seen this mentioned on social media or in the news. Are my friends wrong, or are people celebrating because this is just a step in the right direction even if it may not do anything yet?
The U.S. Chamber of Commerce is likely to file suit: <a href="https://www.uschamber.com/finance/antitrust/chamber-comments-on-ftc-proposed-rule-to-ban-noncompetes" rel="nofollow">https://www.uschamber.com/finance/antitrust/chamber-comments...</a>
> "‘Robbing people of their economic liberty also robs them of all sorts of other freedoms,’ said FTC Chair Lina Khan, who appeared at a House hearing in 2023."<p>Should be the motto of every government in the world.
Regardless of whether this is a good or bad outcome, I'm still totally non-plussed that the best we can do in the law is to ban "unfair" business practices. What exactly is "unfair"? We all know it when we see it, I suppose, but we don't all see things the same way.<p>More importantly, and especially if the Chevron doctrine falls, I don't see how the Congress can delegate so much power, so ambiguously, to the FTC. It seems like a "major questions" issue, especially if the FTC then uses this to regulate practices in a way that amounts to usurping Congress's power. For example, imagine that the FTC declared walled gardens an unfair practice. Or suppose the FTC set a maximum transaction fee (think of Apple here). Such examples would have such tremendous impact as to arguably require legislation rather than bureaucratic fiat.<p>There has to be a better way. Perhaps the best way would be for Congress to every term consider banning recent innovations in business practices that are "unfair" -- to do it <i>before</i> the businesses using those new practices can use them to gain so much power that Congress might have a hard time banning those practices later.
I’m sure all the politicians in the United States, who champion the “right to work”, will of course support banning legal contracts which have the sole purpose of restricting your right to work.
It seems this also allows you to accept another job for a competitor "after hours".<p>I wonder how many companies will start offering "consulting" over brunch on a saturday to their competitors employees?<p>Sure, NDA's still apply, but have fun proving that if it's all verbal over brunch...
Do you folks think this is going to just sail right through?<p>Isn’t it premature to get excited before the proverbial ink is dry?<p>I’m <i>very much</i> in favor of a total ban of noncompete agreements.<p>That said, it seems like all the parties that stand to benefit from them will fight tooth and nail to see this doesn’t come to pass.<p>Thoughts?
Currently:<p>0. Get hired by any MAANG or tech company of sufficient size outside of California.<p>1. Watch as the employment agreement is marked on the edges or in the metadata as being specifically tailored to that state with different protections and obligations than employment agreements signed by other workers doing the same job in different states.<p>2. Negotiate on onerous terms that are harmful to your interests.<p>I don't know if this is more of an "executive order" wish because if the FTC had the power, it probably would've done so already.
One of the best decisions made. Non-competes are harmful and the problem they claim to solve can be resolved in other ways.<p>Why economists are so critical of non-competes - <a href="https://www.nominalnews.com/p/to-compete-or-non-compete" rel="nofollow">https://www.nominalnews.com/p/to-compete-or-non-compete</a>
Just a thought: I think patents do tend to favor the little guys. Coco cola has never had to patent their recipe, as it's a trade secret. I believe ASML and TSMC don't patent some of their technology, since it's a trade secret. They don't want to patent it, as that would reveal details. Also, iirc, if you can patent something that is shown to significantly improve on a previous patent, you can get a patent for that.<p>That's not to say that patents can't be abused—they certainly can—but it can give a smaller person leverage.
Is this just clarifying existing case law? When working on contracts with my attorney he mentioned on multiple occasions that noncompetes were unenforceable. I'm in Michigan for whatever that is worth.
Will this lead to companies getting creative with other types of agreements?<p>For example, I could see this leading to overreaching non-solicitation agreements, where you can't approach "any person/company ever added to our CRM" (for a period of time), thereby effectively ending any chance of you have of building or working for a competitor.
I'm not a senior executive, but I'm curious about:<p>"existing noncompetes for senior executives can remain in force."<p>So what happens to these people, are they stuck with the noncompete forever?<p>so if they leave, they can still be sued?<p>or is it that they can't start a competing business at the same time?
-best- -reason- -ever-:<p>The Commission also finds that instead of using noncompetes to lock in workers, employers that wish to retain employees can compete on the merits for the worker’s labor services by improving wages and working conditions.
This would definitely affect me, but I guess I should wait until it goes into effect and then someone else tests the law? I can't afford to get sued by my former employer.
My prediction – this will be litigated in courts for the next few years until eventually being struck down by the supreme court in a 6-3 decision. And if Trump becomes president we won't even need to wait that long.
Although I agree with noncompetes going away or being limited, I don’t feel good about agencies making broad changes that feel like they should be the outcome of a legislative process. I wonder if this will be challenged.<p>Also - what happens in situation where someone is leaving one company to work for a direct competitor? How do noncompetes function there to prevent sharing of confidential information or trade secrets that will help the competitor?
I see a lot of discussion about interstate vs intrastate commerce/non-competes. I would bet the farm that all these businesses have an EIN, an employer identification number, which is issued by the federal government and thus would be enough to show nexus and jurisdiction for federal regulation and allowing the FTC to take action here.
I think the FAANGs are gonna come out on this one and take it all the way to the supreme court. I don't see this sticking at all, especially with the current SCOTUS
The ban of non-competes is Silicon Valley’s not so secret advantage. Its literally part of its origin story with the Fair Children companies like Intel.<p>The next few years will be interesting. We’ll see if any other metro outside of California will offer it real competition now that the ban on non-competes is national.
> Under the final rule, existing noncompetes for senior executives can remain in force. Employers, however, are prohibited from entering into or enforcing new noncompetes with senior executives. The final rule defines senior executives as workers earning more than $151,164 annually and who are in policy-making positions.<p>Lot's of devs will be surprised to discover they are in policy making positions.
> The Commission also finds that instead of using noncompetes to lock in workers, employers that wish to retain employees can compete on the merits for the worker’s labor services by improving wages and working conditions.<p>I absolutely love this.
I am 100% for this, but it makes me sad that the legislative branch has nearly completely abandoned its duty to pass laws in favor of granting the executive branch the authority to regulate just about everything.<p>This is a problem for two main reasons:<p>1. The executive branch can unilaterally revoke these regulations, making them more volatile. Maybe my non-compete is invalid today, but will it be in 4 years when I actually want to change jobs? Changing a law takes approval of either majority of both chambers plus the president, or a supermajority of both chambers.<p>2. It lowers the stakes in congress, which I believe causes more misbehavior. When the stakes are actually high enough, congress tends to get things done. When the stakes are low, congress grandstands for reelection.
This is a stunning change. We already have a uniquely strong economy. If the US keeps trending toward tackling anti-competitive behavior, we may avoid a downturn for quite awhile!
How does this not have any discussion? Banning noncompetes was one of the biggest drivers of innovation in California that allowed Silicon Valley to outperform other tech hubs.
Does anyone know the history of noncompetes? It seems like a case of Tacit Collusion[1]. But if there is no competitive advantage to the noncompete, how did it catch on?<p>1. <a href="https://en.wikipedia.org/wiki/Tacit_collusion" rel="nofollow">https://en.wikipedia.org/wiki/Tacit_collusion</a>
Does this change a lot for many people?<p>This doesn't mean you can scurry off a just build a competing product/service to your existing employer. You probably also have NDA and/or IP agreements too.<p>> The Commission found that employers have several alternatives to noncompetes that still enable firms to protect their investments without having to enforce a noncompete.<p>> Trade secret laws and non-disclosure agreements (NDAs) both provide employers with well-established means to protect proprietary and other sensitive information. Researchers estimate that over 95% of workers with a noncompete already have an NDA.<p>Trade secrets would generally include anything from code, approaches to problems, product roadmaps, customer lists, etc (so spans not only engineering... but also product, sales, etc).
Banning noncompetes discourages companies from training workers, since they can leave immediately after their training is over. It also impinges on worker freedom. Currently I can apply for jobs with and without noncompetes, and if the job with the noncompete pays substantially more or is more attractive in some other way, I can take it. The FTC rule would deprive me of that choice.<p>I have been hired to write software to implement investment strategies. My noncompete prevents me from leaving and immediately taking a job at company that invests in the same markets. That is a reasonable way for the company to protect its intellectual property.