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Businesses The Courts United States

Federal Judge Partially Blocks US Ban On Noncompetes (npr.org) 134

Posted by msmash from the how-about-that dept.
ZipNada writes: A federal court in Texas has partially blocked the government's ban on noncompete agreements that was set to take effect September 4. An estimated 30 million people, or one in five American workers, are bound by noncompetes. The employment agreements typically prevent workers -- everyone from minimum wage earners to CEOs -- from joining competing businesses or launching ones of their own.

In its complaint, Ryan LLC accused the FTC of overstepping its statutory authority in declaring all noncompetes unfair and anticompetitive. Judge Brown agreed, writing, "The FTC lacks substantive rulemaking authority with respect to unfair methods of competition." Through a statement Wednesday evening, the FTC said its authority is supported by both statute and precedent. "We will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit economic growth, trap workers, and undermine Americans' economic liberty," wrote FTC spokesman Douglas Farrar. The FTC has long argued that noncompetes hurt workers.

Federal Judge Partially Blocks US Ban On Noncompetes More | Reply

Federal Judge Partially Blocks US Ban On Noncompetes

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  • It'll never survive legal challenge. (Score:5, Insightful)

    by mmell ( 832646 ) on Thursday July 04, 2024 @11:09AM (#64600503)
    The first time a corporation loses so much as $.01 - that's one red cent - they'll litigate all the way up to SCOTUS. Give the current composition of that (once) august body, I'm pretty sure this is just a nothing burger. You really don't want to disregard that old NDA just yet, it's not like anybody in politics is interested in degregulating this particular sector.

    • Re: (Score:2, Offtopic)

      by smoot123 ( 1027084 )

      The first time a corporation loses so much as $.01 ...You really don't want to disregard that old NDA just yet, it's not like anybody in politics is interested in degregulating this particular sector.

      Did you read TFA? They highlight a really common case: using an NDA to prevent an employee from leaving and taking all the customers with them. Salespeople try to do this all the time. Small businesses, like the yoga studio mentioned in the article, can't easily survive losing a ton of customers. And if you read the article, the constraints on the ex-teachers were pretty mild: don't open a new studio within five miles.

      That's the thing: NDAs serve a purpose. One might argue whether that's a good purpose but

      • Re:It'll never survive legal challenge. (Score:5, Informative)

        by dskoll ( 99328 ) on Thursday July 04, 2024 @11:54AM (#64600593) Homepage

        An NDA is not a non-compete. And if you want to prevent someone from leaving and taking customers with them, that's a non-solicit agreement which is perfectly reasonable and acceptable. A non-compete agreement is something different and is not reasonable at all in most cases.

      • Re: (Score:2)

        by Bahbus ( 1180627 )

        NDAs sure do serve a purpose. But those are non-disclosures, not non-competes which is what we are talking about. Non-competes serve no purpose and I highly encourage anyone who is currently under one to violate it obviously and shamelessly. I would sign one and violate it the same day just to piss off a company. If they want to do something about it, I'll burn their whole business to the ground.

        • Non-competes serve no purpose

          What are you talking about? TFA cites a perfectly reasonable use of a non-compete (which apparently I erroneously called a NDA and I apologize for the error).

          I would sign one and violate it the same day just to piss off a company. If they want to do something about it, I'll burn their whole business to the ground.

          You do you. There are definitely cases where the company won't find it worth their while to take action. I keep hearing fast food joints make burger flippers sign non-competes and I can't imagine those have ever, ever been enforced. TBH, I'd be quite surprised to see evidence those non-competes actually exist--there's no reason to put one in place if y

      • Isn't competition supposed to be one of the things that makes capitalism so great? If a business requires a non-compete agreement to stay in business, does it really deserve to stay in business? Why should I care if a yoga teacher leaves one business and out-competes the business they left? Isn't that good for the customers?

        And -- just kinda brain-stormin' and spit-ballin' here -- if you don't want your employees to leave and take your customers with them, maybe you could, you know, treat your employees an

        • Yes, agreed. It's nice to see things move towards the consumer's interest for a change.

          • Yes, agreed. It's nice to see things move towards the consumer's interest for a change.

            How sure are you banning non-competes is in the consumer's best interest?

            I'll predict some outcomes. Studios will offer lower wages to instructors. Studios will make less effort to market specific instructors and more on the studio itself. Fewer instructors will be available. There will be more churn as instructors are more willing to switch studios. Studios will be smaller, more likely to offer classes led by the owner(s), and less likely to hire outside instructors. Studios will be more transient.

            There wi

        • Isn't competition supposed to be one of the things that makes capitalism so great?

          You're not wrong. Competition is what regulates free markets. And I agree, a yoga studio which can't retain it's students doesn't sound like all that great a studio. You're free to not sign up at a studio which offers so little value that it can't retain clients.

          But here's the thing: I don't run a yoga studio and I'm definitely not a yoga instructor. Competition between studios for clients must be intense. On a similar vein, competition between studios for good instructors must also be quite intense.

          Here's

      • You cannot "take" customers. You can compete for their business, which is what your are talking about. Those customers would be making decision to do business with that salesperson believing that the salesperson provides them with better value.
        That is competition and it is exactly what the FTC is supposed to facilitate. The fact that people want to mischaracterize a desirable outcome such as competition with a loaded term such as "taking", speaks volumes.

    • Re: (Score:2)

      by r1348 ( 2567295 )

      NDAs and non-compete are two distinct things.

      • Technically true, but it is customary in my experience that the non-competitive clauses are typically buried in a contract called a non-disclosure agreement. There can be many other clauses that have nothing to due with information disclosure buried in them as well. I have seen crazy things like Power of Attorney clauses put in them as well.

    • An enforceable non-compete hurts one corporation (the one trying to hire someone off a competitor) and helps another corporation (the one trying to bar their employee from going to a competitor).

      Not everything is about red v blue.

    • > $.01 - that's one red cent

      I dunno...it's black on my screen.

    • The first time a corporation loses so much as $.01

      We've told you a million times; Don't exaggerate.

  • Destruction of the system continues... (Score:5, Insightful)

    by Lavandera ( 7308312 ) on Thursday July 04, 2024 @11:09AM (#64600505)

    Trump and friends are bent on destroying the system that is the US

    immunity for Trump from hush charges

    yesterday;s SCOTUS decision about cybersecurity

    Trump is dismantling the system to be able to stay in power like Orban, Putin or Erdogan...

    • Re: (Score:2)

      by jmccue ( 834797 )
      No mods due to my other comment, but with the cybersecurity ruling, maybe we will finally get to see how bad the health of Trump really is once his health records end up on tor or wikileaks /s. Wondering if wikileaks still a thing.

      • Re: (Score:3)

        by ugen ( 93902 )

        Trumps records will never end up on wikileaks (given Assange's past actions and political preferences).

      • Wikileaks is a Republican thing... (Score:5, Insightful)

        by rsilvergun ( 571051 ) on Thursday July 04, 2024 @11:42AM (#64600569)
        If you look into it they had a ton of anti-trump stuff they refused to publish. But they didn't have any issues posting the anti-Clinton stuff even without redacting names of innocent.

        Nobody's gonna save us. We have to save ourselves by making damn sure Joe Biden (and it will be Biden folks) wins. And make sure the Dems hold Congress so they can pack the courts.

        Some rando on Twitter said it best: "Just because Alfred is getting on in the years doesn't mean you put the Joker in charge of the Batcave".

        • We have to save ourselves by making damn sure Joe Biden (and it will be Biden folks) wins.

          I guess we are fucked then. Even the threat of a second Trump presidency is not enough to make me want to vote for Biden. What the fuck is wrong with you for even offering up Biden again? YOU are literally part of the problem. A vote for Biden is a vote to continue the same policies that have fucked Americans for my entire lifetime. I categorically reject it. Which will allow Trump to win. Do you see how your refusal to change will FORCE change in an unpleasant way? Be flexible and change. Don't run Biden a

      • Re:Destruction of the system continues... (Score:5, Insightful)

        by thegarbz ( 1787294 ) on Thursday July 04, 2024 @11:59AM (#64600607)

        maybe we will finally get to see how bad the health of Trump really is

        Sarcasm aside, it's irrelevant. At this point he could keel over and die from a heart attack and his supporters would decry it as fake news and vote his corpse into office.

    • Point of correction: Hush money wasn't the charge, nor was it the problem. The problem was trying to write them off on his corporate taxes, in NY state. For sums of money that were well over what the Federal elections law allows. Cohen went to jail for doing it on behalf of Trump.

    • Re:Destruction of the system continues... (Score:5, Insightful)

      by fahrbot-bot ( 874524 ) on Thursday July 04, 2024 @02:56PM (#64600943)

      Trump is dismantling the system to be able to stay in power like Orban, Putin or Erdogan...

      Or, rather, Trump is the conduit by which the Heritage Foundation, and associated ilk, can re-shape the government to their liking, through Project 2025 [wikipedia.org] and keep Republicans in power. People who are not old, rich, white, "Christian" men should be very concerned.

      • People who are not old, rich, white, "Christian" men should be very concerned.

        They eat their own. They should be afraid too.

    • Trump and friends are bent on destroying the system that is the US immunity for Trump from hush charges yesterday;s SCOTUS decision about cybersecurity Trump is dismantling the system to be able to stay in power like Orban, Putin or Erdogan...

      100% correct. People need to be shocked out of their state of denial, many of them I think still believe it can't happen in the U.S.; they're wrong.

  • ceveron (Score:5, Insightful)

    by jmccue ( 834797 ) on Thursday July 04, 2024 @11:13AM (#64600509) Homepage

    With the ceveron ruling, this is probably the first of many of these decisions. I think we should get ready for "respiratory problems" (EPA) and "salmonella poisoning" (FDA) and many other issues that were regulated prior to that ruling.

    The only "good" thing out of this, the Judges and Congress critters will have just as bad as we do with breathing, drinking and eating. Maybe then they will do something once they or their relatives end up in the hospital.

    • Re:ceveron (Score:5, Insightful)

      by whoever57 ( 658626 ) on Thursday July 04, 2024 @11:20AM (#64600521) Journal

      The only "good" thing out of this, the Judges and Congress critters will have just as bad as we do with breathing, drinking and eating. Maybe then they will do something once they or their relatives end up in the hospital.

      Those Congresscritters are mostly wealthy enough that such issues won't affect them. Judges also, may not be wealthy, but, thanks for wealthy donors, live the life of wealthy people.

      • This. So much this. Your congress critter isn't living next to an aluminium smelter or a tire yard. They aren't eating at budget restaurants. They aren't stuck in traffic for an hour a day breathing the exhaust fumes from the car in front of them. They won't struggle to pay for an The idea that the ruling class is affected equally to the rest of the world is a fantasy. They do not care about paying $32 for an asthma inhaler and won't be making a decision between medication or dinner.

        They won't be as affecte

  • You happy about this one?

    • Re: (Score:3, Informative)

      by ArchieBunker ( 132337 )

      Oh look https://en.wikipedia.org/wiki/... [wikipedia.org]

      Appointed by Donald Trump

    • Re: (Score:3)

      by schwit1 ( 797399 )

      Yes. The ruling was not on the substance of the regulation but on whether the FTC has legal authority to make such a regulation. That is a fundamental job of the courts.

      Non-competes should be abolished, but this ban should come directly from Congress or by Congress giving the FTC explicit authority in this area.

    • Yes. If the FTC exceeded its authority then it must be put back in check. What it exceeded its authority to do is irrelevant.

  • the goal is to gut federal agencies (Score:5, Insightful)

    by cats-paw ( 34890 ) on Thursday July 04, 2024 @11:22AM (#64600527) Homepage

    But in 2021, one of her teachers opened a brand new studio three miles away, taking half of Sweet Tea’s unlimited monthly members.

    Well if you lost 1/2 of your customers immediately, I wonder just how good you are ? Also, people follow the teacher, not where the teacher works.

    But her noncompete restricts them from opening a new studio within a five mile radius of Sweet Tea Yoga for two years after ending employment.

    wow. so very, very American.

    Remember that the supreme court and other courts are ruling in order to effectively prevent government agencies from having any power at all. So all you disingenuous hacks can quit with the "congress needs to write clear laws". The whole goal is to make that impossible. Everytime congress gives an agency any ability to regulate the judges can just keep moving the goalposts and say congress wasn't detailed enough.

    Meanwhile a completely bonkers agreement that can hold AFTER YOU ARE NO LONGER WORKING FOR A COMPANY is now being challenged and will be again and if it makes it to the SC they will rule in favor of non-competes

    Why ?

    1 because corporatocracy
    2 the long term goal is to make sure federal agencies have no power whatsoever

    • Re: (Score:2)

      by Calydor ( 739835 )

      As a European it feels completely insane that the so-called Land Of The Free does not allow you the freedom to start your own business.

      • Oh you can, but god help you if you want health insurance. My last contract job I was paying like $800 a month for a plan with a $8000 deductible.

    • Is there no such thing as nuance anymore? I personally see the quandary that both sides are dealing with here. Last I checked, this is exactly what judges are supposed to do.

      From the perspective of the business: Employer came to work for them, has them run one of their classes, they paid the cost of advertising and retaining clientele, clientele get familiar with that employee, and people being the creatures of habit that they are tend to stick with that employee, not necessarily because they're better but

    • Remember that the Supreme Court and other courts are ruling in order to effectively prevent government agencies from having any power at all.

      Not literally true. All they ruled is that courts don't have to take a regulator's word about what Congress had in mind.

      So all you disingenuous hacks can quit with the "Congress needs to write clear laws". The whole goal is to make that impossible. Every time Congress gives an agency any ability to regulate the judges can just keep moving the goalposts and say Congress wasn't detailed enough.

      That's one possible outcome, I suppose. It's not guaranteed. Personally, I think the Chevron defense, that judges had to assume regulators are making reasonable decisions, is abdicating a huge amount of judicial responsibility. Judges and juries are supposed to be evaluating the arguments put forth by both parties. It's irresponsible to tell judges they just have to accept one side's asser

    • It's not that they want to make sure federal agencies have no power it's that they want to make sure those federal agencies are completely under the control of the handful of billionaires who bought clearance Thomas's luxury motor coach.

      The thing you got to understand is the right wing are monarchists. That's literally where the term came from. The monarchist sat on the right and the Democrats on the left in the French assembly.

      You might be wondering why somebody would want there to be a king. Simpl
    • Look at it from the other aide. For the employer, it is protection against being stabbed in the back. Which is what happened with that yoga studio. "I'll teach you the business, you promise not to steal it."

  • A small preview (Score:5, Insightful)

    by ugen ( 93902 ) on Thursday July 04, 2024 @11:25AM (#64600537)

    This is only a small preview of the things to come if Trump wins again. This is what's happening with the judicial branch (bench-stuffed by Trump quite successfully) working *against* the executive (and with minimal involvement by the disfunctional legislative). Now, when executive and judicial work together - this country is fucked.

  • Total BS (Score:5, Interesting)

    by aaarrrgggh ( 9205 ) on Thursday July 04, 2024 @11:34AM (#64600559)

    Some of the examples in an article I read were the plaintiff, a tax preparation firm, a yoga studio, and a restaurant. I owned an engineering firm for a number of years, and I have to say that if you are relying on a non-compete agreement to keep employees* from stealing customers or to protect training investments you are doing it wrong. The yoga studio is the most egregious; the owner does not provide training or even full-time employment. Most treat the instructors as 1099's, and I doubt any provide benefits. If the studio operates in a way that the customers form tighter bonds to the instructors than the owners then it comes down to bad management. The tax prep example where they provide training can justify a limited contract, but the stick needs a carrot to be valid.

    *Limited non-competes for executives are a different matter; I do support these because of the magnitude of business knowledge they are trusted with and the commensurate compensation they are given provides balance.

    • Re:Total BS (Score:5, Insightful)

      by Ksevio ( 865461 ) on Thursday July 04, 2024 @11:53AM (#64600587) Homepage

      Non-competes should be tied to compensation. If you want someone to not do the job for 2 years then you have to pay them x% of their pay for that time

    • I'm thinking that the yoga studio could be similar to a hair salon in that customers form a bond with a particular provider and then follow that provider if they move to another business. I can see that happening in the case where there's a high degree of individualized instruction, and the person is more like a personal trainer than an instructor teaching yoga classes to a group.

      • I am sure it is... but a smart studio owner also makes their presence known to clients and manages the interaction medium between clients and instructors outside of class. Hard to do with Instagram and the like, but you can make the structured part work with your reservation system to limit how much access random instructors have to client address, email, and phone numbers.

        I have been screwed over before by employees starting their own competing businesses before and recruiting employees, but the key is rea

    • The Supreme Court decided on a completely fabricated case. https://newrepublic.com/post/1... [newrepublic.com]

    • Most treat the instructors as 1099's, and I doubt any provide benefits.

      This is true for a lot of the "gig economy." These are basically independent contractors, and it is difficult at best to justify a non-compete because that denies the individual the ability to earn a living in his or her field of expertise. Getting paid on a 1099 also means you are responsible for filing all tax-related items and paying the second half of your Social Security and Medicare taxes (also known as the "self-employment tax"). Also, a non-compete is not the same as a non-disclosure agreement.

  • Tweak the Game (Score:5, Interesting)

    by laughingskeptic ( 1004414 ) on Thursday July 04, 2024 @12:40PM (#64600681)
    Companies wait until starting day to spring a plethora of things to sign. Insist on all of this being part of the offer and don't accept the offer until all is known and negotiated. Make it clear a non-compete is a non-starter. Get the details of the 401k and Medical Plan while you are at it. There should be nothing to sign other than the W-4 on the first day. Do not disclose your intent until the first offer letter arrives -- this is when you have the most leverage over the company hiring you. They feel they have invested in the process of hiring you at this point and they do not want to restart the process with new candidates.

    • >> Companies wait until starting day to spring a plethora of things to sign

      They most definitely do, and this is well after you've resigned from your previous job and you are depending on the new one to pay your bills. It isn't negotiable, everyone has to sign the documents in order to be employed there.

      If you are working in IT there will usually also be a proprietary information agreement that states the company will own anything you think up or produce even if it is on your own time. I've been asked

      • Nearly impossible to get companies to bend on IP assignment contracts. Maybe at a small company and 1099/C2C. Never been successful at it with medium/large companies. Would be interesting to see if union shops have figured that problem out.

        • In my experience there isn't a mechanism in place to modify the agreement even if the hiring manager wanted to do it for you. It's just company policy.

    • In the distant past, I got a non-compete agreement to sign before the interview! I looked at it and decided not to continue (in hindsight I was maybe naive because there weren't a lot of job offers in that time frame and it hurt).

  • "partially blocked the government's ban on noncompete."

    Is that a triple negative, or a quadruple negative?

  • California first banned non-compete contracts in 1872. Since then, California has been the central focus of technological innovation, as in Silicon Valley.

    Companies started in California and prospered BECAUSE of no non-competes: Hewlett Packard, Apple, Intel, AMD, Oracle, Silicon Graphics, Google(Alphabet), NVIDIA, Facebook (Meta), Twitter(X), OpenAI, Uber, and tons more. Your smart phone is either Apple or Android, both located in Silicon Valley.

    Management has to manage with the possibility that any o

  • The kind with posters of Timothy McVeigh and Donald Trump on his wall?

  • This is a perfect example of a rule that the public (employees, not so much the corporations) think is a great rule. However, it's pretty much a given that the FTC has no power to have invented and mandated this rule. So it's proper that the court is throwing this rule out as un-Constitutional. Now that Chevron deference is gone, the Supreme Court will likely agree with this Texas judge. As they should.

    If Congress wants to have this regulation, they need to pass a law saying so. I hope they get off their sn

    • Re: (Score:2)

      by cstacy ( 534252 )

      Congress is a dysfunctional dystopian bucnh of shitheads.

      Happy Fucking Fourth of July.

      I forgot to mention that the electorate are ignorant and easily manipulated simple folks, morons whose idiocy is exceeded only by their apathy.

  • The judge (Score:2, Troll)

    by colonslash ( 544210 )
    Ada Brown [wikipedia.org] is an African American and Native American female judge appointed by Trump. Tell me again how he's a sexist and a racist?

  • I do not understand: US people totally forget about all those issues when they get to vote for their leaders?

  • HE'S IMMUNE.

    Then he can pardon the people that carry it out.

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