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The FTC proposed a rule to ban non-competes and workers applauded: NPR

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It is estimated that one in five workers in the United States, or about 30 million people, have signed non-compete agreements. Many say they didn’t know the details and barely remember signing them.

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It is estimated that one in five workers in the United States, or about 30 million people, have signed non-compete agreements. Many say they didn’t know the details and barely remember signing them.

Peter Dazeley/Getty Images

Joby George was 21 when he landed his first job out of college, working at a software company focused on the pharmaceutical industry.

He stayed with the company for 14 years, excited to play a role in making the medicines people take every day. When he finally decided it was time for a change, he realized he might have a problem.

“I don’t exactly remember signing a non-compete agreement, because there are a lot of forms you have to sign when you’re hired,” he says.

But indeed he had. And now, his employer wasn’t happy about him leaving for a new job at another software company in the pharmaceutical space – although, says George, he had no trade secrets to take with him.

However, his company sued.

One in five US workers signed non-competitive contracts

Researchers estimate that one in five workers in the United States – about 30 million people – have signed non-compete agreements prohibiting them from taking jobs with similar companies or starting a rival business of their own within a certain period of time, usually from six months to two years.

Companies have long said that non-competitors are necessary to protect their intellectual property and investments.

But now the Federal Trade Commission is trying to ban the deals, saying they suppress wages, hinder innovation and deprive workers of their economic freedoms. This month, the agency proposed a new rule that prohibits employers from using them, both with employees and contractors.

Some are already questioning whether the FTC has the jurisdiction to make such a radical change, affecting tens of millions of workers across the country. Others celebrate the change.


President Joe Biden passes a signature pen to Federal Trade Commission Chair Lina Khan on July 9, 2021, after signing an executive order promoting competition in the US economy. Eighteen months later, the FTC followed up on the executive order by proposing a rule banning non-competitors.

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President Joe Biden passes a signature pen to Federal Trade Commission Chair Lina Khan on July 9, 2021, after signing an executive order promoting competition in the US economy. Eighteen months later, the FTC followed up on the executive order by proposing a rule banning non-competitors.

Alex Wong/Getty Images

“People have a fundamental right to make their own career choices,” said Peter Gassner, CEO of Veeva Systems, the software company that hired George and supported him and dozens of others in fighting noncompetitors. “Talent mobility has created the most innovative companies in the world.”

The case against George was eventually dropped.

Low-income workers, such as janitors, are also subject to non-compete

Najah Farley, senior attorney with the National Employment Law Project, says the FTC’s proposed rule would help protect low-income workers, millions of whom are subject to non-competition.

“We definitely encourage them to do that — make a rule,” says Farley, who worked on state legislation aimed at restricting non-competitor use. “I think they’ll be able to address this problem on a very broad level.”

In his previous role at the New York State Attorney General, Farley worked a high-profile non-compete case against fast-food sandwich chain Jimmy John’s, and later heard from other low-income workers bound by non-competitors, including security guards, cleaners and cafeteria workers.

Low-income workers often don’t have the wherewithal to challenge their employers or sit out until their non-competitors expire, says Farley. The only way for many of them to get significant pay increases is to change jobs.

“So if you’re in a situation where you can’t get another job in your industry or you can’t get another job nearby, obviously your ability to raise your compensation will be limited,” he said. she says.

A frightening effect on workers

While non-competitors are widespread, lawsuits against them are not, says Matt Marx, a professor at Cornell University who studies employment contracts.

“It’s more of a frightening effect – when you’re subject to non-competition, you think you can be sued,” he says. “And so it’s more the expectation and fear that drives their behavior.”


Robin Catalano, a freelance writer based across the Berkshires and Hudson Valley border, urges other freelancers to carefully review employment contracts and negotiate any non-compete clauses they may contain.

Cassandra Sohn


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Cassandra Sohn


Robin Catalano, a freelance writer based across the Berkshires and Hudson Valley border, urges other freelancers to carefully review employment contracts and negotiate any non-compete clauses they may contain.

Cassandra Sohn

That’s what happened to Robin Catalano after she quit her job of five years blogging and managing social media for a home decor company.

She had signed a non-compete clause that banned her from working for another decor company for a year – which was a problem given her background in fabrics, dyes and the design process.

She says the terms of her non-competition would have made more sense if she had been CEO of the company, with plans to start a rival business. But her plan was to become a freelance writer.

“I’m a single owner. I’m taking care of myself and my cats,” she says. “It’s not the same.”

Still, for an entire year, she didn’t introduce herself to other employers in the decorating industry, a setback for her fledgling business.

“I’m a rule-follower, for better or for worse,” she says, noting that she’s now much more careful about what she signs.

There are alternative ways to protect trade secrets

Even those who generally support the use of noncompetitors point out that there are other ways to protect trade secrets.

Kevin Vozar, senior director of business development and owner relations at Cabins For You, says his company has a lot of sensitive information he wouldn’t want an employee to leave with, like marketing strategies and pricing tools.

The property management company handles vacation rentals in the Great Smoky Mountains, where competition is fierce.

“We’re all going after the same property owners to add inventory to our platform. We’re all going after the same finite group of tourists that are coming here,” he says.

But at Cabins For You, most employees have no competition, says Vozar. Instead, they sign non-disclosure and non-solicitation clauses, which prohibit them from disclosing company secrets, including customer lists.

Still, he says, noncompetitors may be needed in places like research institutions and in industries like biotechnology.

“I wouldn’t agree with a blanket — you know, getting rid of all non-competitors across the country for all industry spaces. I think that’s being a little short-sighted,” says Vozar. “I believe there is room for non-competitors on a very limited spectrum.”

Workers can protect themselves

Cornell’s Marx hopes that whatever happens to the FTC’s proposed ban on noncompetitors, there will simply be more awareness everywhere.

“People need to ask themselves, ‘Am I going to have to sign a non-compete agreement?’ They need to negotiate the length,” he says. “And they are negotiable.”

Catalano, for example, now routinely calls for clauses to be removed from freelancer contracts, and says most employers are in agreement.

In his former life in the private sector, Marx signed non-compete contracts and, as a boss, asked employees to sign them. But after working in California, where non-competitors have long been inapplicable, he realized that without them he would be a better manager.

“It kept me on my toes thinking, ‘How do I keep people engaged?'” he says. “Every day and every week you have to convince them that this is where they want to be.”

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