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The Federal Trade Commission is close to banning noncompete contracts.
Those are the legal documents that media companies, especially local TV stations, force journalists to sign that keep them from working for competing stations, sometimes for up to a year. These contracts are not just for high-profile anchors, but also for producers, multi-media journalists and reporters who earn $30,000 to $50,000 a year and want to make more dough without moving to another town.
The FTC says about 30 million Americans are covered by noncompete contracts. California and Oklahoma already banned such contracts, and Maryland and Oregon did not allow them to lower paid workers. Florida allows them to be stringently enforced.
Because non-compete clauses prevent workers from leaving jobs and decrease competition for workers, they lower wages for both workers who are subject to them as well as workers who are not. Non-compete clauses also prevent new businesses from forming, stifling entrepreneurship, and prevent novel innovations which would otherwise occur when workers are able to broadly share their ideas. The Federal Trade Commission proposes preventing employers from entering into non-compete clauses with workers and requiring employers to accept existing non-compete clauses. The Commission estimates that the proposed rule would increase American workers’ earnings between $250 billion and $296 billion per year. The Commission is asking for the public’s opinion on its proposal to declare that non-compete clauses are an unfair method of competition, and on the possible alternatives to this rule that the Commission has proposed.
The number of workers with noncompete contracts may surprise you. Research by the Federal Reserve Bank of Minneapolis found that 2% of workers who earn $20 per hour or less reported having a noncompete agreement in their current or most recent job, and nearly one in five workers who make more than $20 per hour has a noncompete clause in their contract. The research found:
When Oregon ended the enforcement of non-competes for hourly paid workers, wages for those workers rose by 2–3 percent, with larger effects in occupations where non-competes were more common.
Second, low-wage workers have less access to legal advice than other workers have, making it more difficult for them to enter a fair, well-informed negotiation with employers over their non-compete contracts. Indeed, workers—many of whom receive non-competes only on or after the first day of work and without an opportunity to negotiate—report that they rarely negotiate over non-competes and frequently misunderstand whether and to what extent their non-competes are enforceable .
Employers sometimes say noncompetes protect companies from workers passing on trade secrets. But the Federal Reserve researchers said the lowest-paid workers rarely have access to such sensitive information. And it may be true, the researchers say, that noncompete contract workers do get more training.
At least one in three businesses require their workers to sign a non-compete agreement. These aren’t just high-paid executives or scientists who hold the secret formula for Coca-Cola so Pepsi can’t get their hands on it. A recent study found one in five workers without a college education is subject to non-compete agreements. They’re construction workers, hotel workers, disproportionately women and women of color.
Think of the 26-year-old employee at a company. She’s a star worker, but she isn’t being treated right. She’s underpaid, passed over for promotions. A competitor across the street knows and wants to bring her in at a higher wage, but she can’t do it. Her company threatens legal action over a non-compete clause she had to sign in order to get hired in the first place. She can’t afford a lawyer for help, so she’s locked in.
Imagine if you’re in her shoes. You’d feel powerless, disrespected, bullied, trapped. That’s not right. Workers should be free to take a better job if someone offers it.
If your employer wants to keep you, he or she should have to make it worth your while to stay. That’s the kind of competition that leads to better wages and greater dignity of work.
The FTC could face a legal battle over this proposed change. Companies could challenge whether the FTC has the authority to impose such a regulation. The government says non-competitive amount to unfair competition and therefore is a violation of the 1914 Federal Trade Commission Act.
Among the professions that make wide use of noncompetitives are software engineers, hair stylists and chefs.
The FTC’s proposed rule includes a provision that an employer, like a TV station, would be required to send a notice to all workers currently covered by noncompete clauses saying something like this:
A new rule enforced by the Federal Trade Commission makes it unlawful for us to maintain a non-compete clause in your employment contract.
As of [DATE 180 DAYS AFTER DATE OF PUBLICATION OF THE FINAL RULE], the non-compete clause in your contract is no longer in effect. This means that once you stop working for [EMPLOYER NAME]:
You may seek or accept a job with any company or any person—even if they compete with [EMPLOYER NAME].
You may run your own business—even if it competes with [EMPLOYER NAME].
You may compete with [EMPLOYER NAME] at any time following your employment with [EMPLOYER NAME].
I can only imagine the shivers running down the spines of bosses — who are already struggling to hire people — who have to send notices to staff saying they are free to go to the higher paying competition once their contracts expire. This could be the long overdue motivation that forces companies to pay their workers more.
Car companies usually want to manufacture more cars and trucks so they can earn more profit. But, during the pandemic, they learned a different way to make more profit: produce 4 million fewer vehicles and raise prices because of the big demand for the tight supply. Look at auto manufacturer profits in the last year, even while car production has declined:
Consumer Price Index data from November shows they were paying about 20% more for new vehicles than in late 2019 before the pandemic hit.
The average new vehicles sold for just under $49,000 in November, according to Kelley Blue Book.
Imagine you were in a tough spot in your life and turned to mental health support and found your provider was not a human, but a ChatGPT online program that produced clear and even useful responses quicker than a human… but was a computer. A free mental health service provided such responses to 4,000 at-risk patients, who they said they knew they were not talking to real therapists.
After word of the project became public, there was a predictable outcry over an artificial intelligence program creating artificial empathy. And now the technology is being used to help humans write faster supportive responses.
As I said last week, generative pre-trained transformer (GPT) technology may be the 2023 disrupter of the year. If you missed last week’s column explaining the power of this tech, get caught up now. Really, you should be following this.
I won’t pretend to be objective about this topic. I advocate for courtrooms to be open to cameras and recordings.
A level of absurdity is unfolding in Maryland that deserves your attention. Until recently, the Maryland judiciary forbade media from broadcasting audio recordings from official recordings of criminal proceedings, even though those very recordings are made available to the public. A federal court recently overturned the so-called “broadcast tires.” the Maryland Judiciary’s response is to close the recordings to everyone: to the public and to the media.
Maryland law requires all criminal courts to be recorded but also makes it illegal to broadcast the recordings, even while they are available to the public. The legal battle over the friction between these two requirements sparked a lawsuit in 2019 filed by civil rights activists and others. The government argued that it was a matter of safety, and that people who testify in criminal trials may be concerned for their safety if the proceedings could be broadcast. The state does not allow live broadcasts and that is not part of the argument.
Just days after the law was deemed unconstitutional, the Maryland judiciary proposed a rule that would stop members of the public from obtaining copies of the recordings in the first place — though it would allow them to listen to the recordings at the courthouse under supervision of a court staffer.
On Friday, the Maryland Supreme Court sent the rule back to the judiciary’s rules committee to consider, as if it is a tough call to make recordings of a public trial available to the public and the media and tell the media they can’t air what the public heard.
Who knows, maybe the courts will one day move into 2023 and allow you to see what’s happening, too. Or is that too radical? Next thing you know you will have people asking to put whole trials on that interweb thingie.
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