HARTFORD, CT – As the Federal Trade Commission prepares to enforce its ban on non-compete agreements (NCAs), the agency’s chair spoke in Hartford about some of the gaps that could still remain when the rule goes into effect.
FTC Chair Lina Khan said Friday that the commission’s new rule – which goes into effect in September if it’s not struck down – will outlaw most NCAs, but will leave loopholes for some because of constrictions on the FTC’s authority.
Most notably, organizations that function as nonprofits will still be able to use NCAs, though Khan said she and the commission will be making a point of analyzing whether or not those organizations – often hospitals or healthcare centers – actually function on a not-for-profit basis.
Banks wouldn’t be covered under the rule either. Khan said that while there will be gaps in the rule, states can step in and help fill them, with the FTC providing a floor for the other states where rules are not nearly as strong.
US Sen. Chris Murphy – who led Friday’s listening event – said that Congress is still aiming toward more long-lasting prevention of these agreements through legislation, as that would be much more difficult to overturn under a president that could be in favor of non-competes.
“We continue to pursue federal legislation. Our legislation is bipartisan and continues to pick up support on both sides of the aisle. Obviously, the sponsors of this legislation are very supportive of what the FTC is doing, but we want to buttress that with a law that spans administrations,” Murphy told reporters Friday.
Khan said that legislation cracking down on NCAs would be wider-reaching, and not leave gaps for non-profits or banks to still include those clauses in employee contracts.
NCAs, in general, prevent workers from leaving their jobs for higher-paying or more influential positions, and also prevent them from starting a business in the same field.
They are typically viewed as having more profound impacts on individuals that are higher up in a company or those who are being paid well, but Murphy and Khan said that is not always the case.
“As we started looking at this issue, you realize that we’re talking fast food workers, security guards, janitors, gardeners, journalists, health care workers,” Khan said.
Murphy said that about 30% of workers who are subject to NCAs are making $13 an hour or less.
Several other panelists mentioned other impacts of non-compete agreements, like the strain NCAs place on healthcare workers who can only treat patients within a limited radius. What happens next? Many low-income patients are unable to get to their appointments when their healthcare provider has moved.
Another issue that comes up is workers who can’t escape workplace harassment or discrimination because of non-compete causes in their contracts.
Khan and Murphy said the impact of of NCAs and contractual non-complete clauses on low-wage earners is most devastating in how it takes away their legal right to absent themselves from a hostile work environment.
Blumenthal said that these agreements – which are often snuck into contracts – “enslave” workers, and give them no other options.
Khan said that there has been some commentary about the authority – or lack thereof – of the FTC to enforce a rule like this. She said that other cases have already laid down the precedent for the commission to make rules regarding fair labor and trade practices, and that if it goes before the courts she expects it to go in the FTC’s favor.
The US Chamber of Commerce opposes the rule and said the effective date should be pushed back.
The chamber joined with other business groups to sue the FTC on grounds that the rule would have negative impacts and should be decided by Congress.
