Why Non-Competes Are Back From the Dead
Episode 475 | Author: Emilie Aries
Turns out, non-competes aren’t going away, after all. What does that mean for workers?
If you’ve been keeping an eye on the economic news, you may have heard that the FTC was pushing to pass a ruling to ban non-compete agreements earlier this year. However, a recent federal court ruling has blocked that path and road and turned this promising nationwide ruling into a far-fetched dream. Before you throw up your hands and move to Canada, here’s what’s going on and why there’s still light at the end of this workers’ rights tunnel.
A quick recap on the FTC ruling about non-compete agreements
I go deeper into the backstory in Episode 459, Why Non-Compete Agreements Can No Longer Derail Your Career, but here are the highlights:
Non-compete agreements were initially established to prevent disgruntled knowledge workers from sharing trade secrets. Somewhere along the way, they started being applied more broadly across industries, even impacting lower-income workers such as hairstylists. In some cases, in order for an employee to leave their current job and take up another position in the same field, they would have to relocate to another state entirely. It’s not hard to imagine the socioeconomic ramifications of this.
Back in June, it looked like the FTC would succeed in passing a federal ban on non-compete agreements, arguing that they unfairly limited free market competition in the labor market. But alas, that’s not what happened.
What happened to the ban?
It was a federal court in Texas that ultimately struck down this ruling after businesses in three states—Texas, Pennsylvania, and Florida—sued the FTC to block the ruling. Not all these cases succeeded, but the differing outcomes mean the issue is likely to be taken up by the Supreme Court.
Unfortunately, the current Supreme Court has already made clear that it will push back against federal agencies exercising power through rule-making. This means the outcome of any Supreme Court case on this topic is probably not going to be in favor of the workers most heavily affected by non-compete agreements.
The path forward on banning non-compete agreements
The federal ban on non-competes might now be a pipe dream, but that doesn’t mean we’re out of options. State lawmakers might not get the glitzy media coverage of their national counterparts, but they have a lot of power. Better yet, we as individuals have more power in these arenas.
A recent article in Axios made some good points in this regard. As of September 2024, 33 states have restrictions on non-competes for lower-income workers and in industries such as healthcare. Just last year, Minnesota joined California, Oklahoma, and North Dakota in passing a blanket ban on these contract addendums, too.
This is yet another example on a long list of reasons to get to know your state representatives and what policies they stand behind. I encourage everyone to learn who in their local State House is willing and positioned to put forward legislation that could banish or restrict non-completes.
A moratorium on these harmful agreements is key to fair free market competition. It enables workers who might not have other negotiation options at their disposal to vote with their feet and take their expertise elsewhere when their current employer isn’t serving them—without derailing their careers or uprooting their financial security and their lives.
If you’ve been impacted by a non-compete agreement, I’d love to hear from you. What questions do you have now that the federal ban is off the table, and what do you see as your options? If you live in a region with state-level bans, how is this affecting your ability to freely pursue your career? Weigh in on the Courage Community on Facebook, or visit our group on LinkedIn.
Related Links From Today’s Episode:
Episode 459, Why Non-Compete Agreements Can No Longer Derail Your Career
Economic Innovation Group’s State Non-Compete Law Tracker
Axios: The Future Of The Noncompete Ban Isn't Totally Bleak
Find the resources you need to TAKE ACTION in your state:
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[INTRO MUSIC IN]
EMILIE: Hey, and welcome to the Bossed Up podcast, episode 475. I'm your host, Emilie Aries, Founder and CEO of Bossed Up. And today I have a kind of bleak, but not totally hopeless update on non-compete agreements.
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If you're a loyal listener and subscriber to this podcast, first of all, thank you for being here. You may have heard back in June on episode 459, Why Non-Compete Agreements Can No Longer Derail Your Career, the great news about the FTC creating a new ruling that basically said all non-compete agreements, almost all non-compete agreements would be null and void as of early September, which is when I'm recording this episode. And just at the 11th hour, a federal court in Texas successfully blocked that rule from becoming a reality.
So I may have celebrated too soon, but I wanted to loop back to give you an update on what's going on with non-compete agreements now, why it's unlikely that a national ban will ever actually come to fruition, and what we can do instead to make sure we're advocating for workers' rights and free market competition when it comes to the labor market. Because the fact of the matter is this fight ain't over yet.
So the latest news is that Texas has become one of three states that had businesses suing the Federal Trade Commission to block this ruling. In some states, they were successful. In other states, they were not. But in all three cases, we are likely to see an appeal go forward, meaning that this issue is now set to become one that's taken up by the U.S. Supreme Court. Now, this particular Supreme Court has already shown some hostility towards federal agencies exercising power through rulemaking, which means that this relatively conservative court is not exactly going to be friendly towards this issue. It's not going to look kindly upon the FTC creating policy, as they might call it, through the interpretation of the rulemaking process.
So if it does go to the Supreme Court, which it's widely suspected it will, it's not anticipated to go in the favor of working people who, are disproportionately negatively impacted by non-compete agreements, which prevent you as a worker from having the ability to exercise your freedom of going to get another job at any kind of other employer, including one right down the street or one who's a competitor in your marketplace. For all the details on that, go check out a much longer case that I get into on episode 459, about the harm that non-compete agreements cause to workers at all socioeconomic levels. But particularly working class folks, we're talking like service workers, like hairstylists, not just white collar knowledge workers, which was originally the population most targeted by non-compete agreements. But lots more details on that in episode 459.
So if the Supreme Court does take this issue up in coming years, which it's anticipated to do so, it's probably going to strike down this ban and make it even less likely that the FTC will ever be successful in instituting a National ban on non-compete agreements. So that's a bummer. That left me pretty depressed. But there was a really good case made in Axios recently around why this doesn't mean the end of this conversation is necessarily upon us. Like so many issues in our politics these days, what this really means is that the sort of locus of control now rests in state governments. Action on the state level is where we should remain focused because state houses across the country are taking this issue up themselves.
In fact, Minnesota just passed a non-compete ban last year, joining California, North Dakota, and Oklahoma, who also have blanket bans on non-compete agreements. 33 other states have restricted the use of non-compete agreements for lower income workers or in industries like healthcare. So there's actually a really helpful non-compete law tracker that I'll link to from the Economic Innovation Group. That's an interactive map of current state non-compete laws so that you can search based on, I don't know, let's say a job you're considering in a totally different state to understand your rights as a worker. So I'll make sure to put that in today's show notes.
So what this means is instead of hoping for the FTC to come to the rescue on our behalf, or really for anyone at the federal level to pass a national ban on non-compete agreements, we have to focus our attention on the somewhat less exciting but super powerful local state houses. I know that not everyone knows who their state rep or their state senator is, but this is all the more reason to get to know those folks. Reach out to them, find out who's representing you at the local level, and find out who is willing and able and positioned to put forth state legislation in your neck of the woods to make non-compete agreements a thing of the past. This is what helps create free market competition for workers to be able to vote with their feet if their employer is frankly abusing them and not have to feel like their hands are tied when it comes to being a job seeker or a knowledge worker or really any kind of worker in today's economy.
So my challenge for all of us is, don't be too dismayed or depressed by the fact that this FTC ruling that was so close to being instituted is not going to happen and not going to move forward. Thanks, by the way, in no small part to the activism perpetuated by the U.S. Chamber of Commerce. They were really behind killing this non-compete ban. And I get into that, like the rights of employers, like myself. I'm also an employer in this process in my last episode. So go listen to that if you want to understand the nuance behind this debate.
[SIGH] But this was a real loss for working people, in my opinion, for workers' rights. But the fight ain't over yet. So go see what's happening in your state. Take action in your statehouse. Make sure you know who represents you at the state level. And ask who is putting forth legislation this year to ban non-compete agreements where you work and where you live, because that's really the best we can hope for at this moment. And there is a lot that can happen in our statehouses.
If you're impacted by non-compete agreements, I'd love to hear from you. What do you make of this recent development? What questions are you left with? And what do you see as your options before you? If you live in one of the states that has a ban on non-compete agreements already,
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what does that mean for your ability to pursue your career in the way that you want to? Let's keep the conversation going, as always, in the Bossed Up Courage Community on Facebook and in our Bossed Up Group on LinkedIn. Until next time, let's go. Let's keep bossing in pursuit of our purpose. And together, let's lift as we climb.
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