“After Chicago’s Grace, a three-star fine dining restaurant, abruptly closed in 2018, its chef and general manager sued the restaurant’s owner over a non-compete clause that barred them from opening a new restaurant in the area,” Food & Wine noted following Biden’s executive order on noncompetes. “Last year, a Washington, D.C., restaurant owner sued his former chef for allegedly violating a non-compete after accepting a position with a competitor. The suit was eventually settled with no money changing hands.”
The Counter offered more examples: “Other notable cases include a 2018 lawsuit filed by a craft brewery against a former employee, who quit to take on a similar role at another company 100 miles away, as well as multiple instances of chefs being forced to wait out lengthy noncompete periods before they could resume working at restaurants.”
Noncompete agreements are also a significant issue for workers at beauty salons, with the agreements expected of hairstylists and manicurists. Nurses have found their lives upended by noncompete clauses. These are all over the place, and in businesses where the only real justification is the illegitimate one: to keep workers bound to an employer when they want to leave.
That’s what the FTC’s proposal would address, banning future noncompete clauses and requiring existing ones to be rolled back. Here’s the core of the proposal: “It is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.”
Workers lose more than $250 billion in potential pay every year, the FTC says, because of noncompete clauses limiting their options. The proposed rule would change that.
“Noncompetes are basically locking up workers, which means that they’re not able to match with the best jobs for them,” FTC Chair Lina Khan told reporters on Wednesday. “If this rule were to be finalized and go into effect … [it] would force employers to compete more vigorously over workers in ways that should lead to higher wages and improved working conditions, basically injecting competition into the labor market.”
The proposal faces a long process and almost certain litigation before it can go into effect, but the fact that, well over a year after Biden’s executive order calling on the FTC to draft such a rule, the agency came up with such a strong and unequivocal proposal is an important step.
