Economic Justice

Burdened and Bound: A Nation of Traumatized Workers

Noncompete agreements erode rights and impose harms, proposed ban breathes new life into economic liberty

Luke Hinrichs

December 15, 2023

Shelbie Brennen was in her late twenties when she was diagnosed with cancer. While her subsequent chemotherapy treatment took a heavy toll on her health, family, and ability to make a living, Brennen’s work failed to accommodate her situation. With two toddlers at home and in need of care, Brennen decided to make a change.

Brennen needed to work closer to her home so that she could take care of her children while still financially providing for her family. A year after being diagnosed with non-Hodgkin’s lymphoma, Brennen took a leap of faith for her family and for herself. 

“I need to be there for my kids.” Brennen said to the [F]law. “For me, it was focusing on my kids more so than myself.”

Brennen left the hair salon where she had been employed for seven years and opened a small salon near her home with another hair stylist. She was looking forward to the start of an exciting, new chapter. She was going to build something, and she was going to own it. To Brennen, she was simply pursuing the American Dream.

However, Salon Development, the parent company of Brennen’s previous employer which owns over 40 hair salons in five states, filed a lawsuit against Brennen alleging she violated her noncompete agreement. 

The threat of the lawsuit alone risked shuttering her new business since Brennen could not afford legal counsel as she put all of her savings into starting the business and was living below the poverty line. As a result, Brennen said she lived in constant “stress and strain.”

Brennen’s experience is not unique. Over one in five American workers, or between 36 million and 60 million private-sector workers, are subject to noncompete agreements. 

Noncompete agreements are contractual obligations that typically prevent an employee from working for competing employers, starting their own business, or generally working within the same industry after their employment ends. 

These restrictive agreements can disastrously transform a layoff or job departure into years of prolonged unemployment. The terms of these agreements can dictate a radius, industry, and time duration that a former employee cannot seek work. For example, one broadly restrictive noncompete agreement stated that, for two years after the last day of employment, the former employee was prohibited from “engag[ing] directly or indirectly, either personally or as an employee, associate, partner, or otherwise, or by means of any corporation or other legal entity, or otherwise, in any business in competition with Employer,” within a 100-mile radius. The worker would have to find a job either 100 miles away or in a new industry unrelated to their background and experience.

A 100-mile radius provision is not uncommon and can force unemployed workers to choose between continued unemployment or costly relocation. 

Noncompetes are, at their core, tools of power with the base-level effect of restricting economic mobility and freedom to exit a job and choose where one works.

These agreements often also include specific damages for violations, which can go up to $100,000 and beyond to even $500,000. A worker can owe hundreds of thousands of dollars to their former employer for the sole act of taking a job to survive and pay the bills.

Although the scope and duration of noncompete agreements can vary, noncompetes are, at their core, tools of power with the base-level effect of restricting economic mobility and freedom to exit a job and choose where one works.

While the immediate impact of these restrictive agreements burdens the direct subject of the agreement, the harms of noncompetes are not confined to the individual. Spillover effects cause those who are not even subject to noncompetes to also experience harms. One study found that when the use of noncompete clauses by employers increases, it drives down wages for workers who are not even subject to noncompetes but work in the same state and industry. Further, workers not subject to noncompetes also, on top of lower wages, experience decreased job mobility (the ability to switch jobs) due to the rippling effects of noncompete use. 

Noncompete agreements not only depress wages and obstruct job mobility, but they also trap workers in abusive, hostile work environments. 

Across industries and labor markets, according to a 2022 Treasury Department report, noncompete agreements contribute to lower wages, worse benefits, poorer working conditions, lower worker mobility, lower and unequal bargaining power, and increased hiring costs for employers. 

Noncompetes simultaneously lower worker bargaining power while compounding the harms of existing inequalities and oppressive work environments since vulnerable workers—those who already have diminished bargaining power such as immigrants, minority groups, and women—are more likely to be subject to these restrictively harmful agreements.

Headshot image of Sandeep Vaheesan.

Sandeep Vaheesan – Credit: https://www.openmarketsinstitute.org

Noncompete agreements not only depress wages and obstruct job mobility, but they also trap workers in abusive, hostile work environments. 

“Noncompetes effectively function as a bad boss clause. If someone is being abused or discriminated against, or otherwise mistreated under a noncompete clause, they often just have to stick it out,” said Sandeep Vaheesan, legal director of the Open Markets Institute and previously a regulations counsel at the Consumer Financial Protection Bureau. 

Although it was once assumed that noncompete agreements were only imposed on highly-technical and executive level workers, reports increasingly revealed that noncompetes are deployed in industries across the economy and across the income scale, from low-wage workers to upper management and executives alike. Whether its food services, warehouse workers, hair stylists, engineers, physicians, executives, interns, or security services, companies are subjecting workers to restrictive noncompetes and imposing the harms that accompany these contractual obligations. 

The Justification Narrative of Noncompete Agreements

Michael Kenny, a single-father and veteran, found employment earning $11.75 an hour as a security guard for Critical Intervention Services (CIS), a Florida private security company. After a few days of training, Kenny was assigned to patrol an apartment complex from 7 PM to 7 AM. However, he could not find overnight childcare for his daughter to accommodate his shift. Kenny resigned, ending his 13-day tenure at the company. He expected to move on to other employment opportunities, and he did. 

Soon after leaving CIS, Kenny took a daytime security guard job, monitoring security cameras at a local bank and making close to $15 per hour. Kenny’s only payment from CIS was docked to repay the company for advancing him the cost of the state-required training as stipulated in his employment contract. He assumed his ties to his former employer were severed and he was free to move on, free to earn his living elsewhere. 

However, Kenny’s new, higher paying job with better hours was also short-lived. CIS wrote to his new employer claiming that Kenny had violated a two-year noncompete clause, and therefore had unlawfully taken valuable proprietary information and specialized training. According to CIS, the company was protecting its interest since Kenny’s state-required classroom and field training allegedly featured specialized, proprietary expertise. Michael Kenny was then fired from his new job.

Headshot image of Brian Callaci.

Brian Callaci

Kenny’s experience highlights the typical justification offered by companies seeking to impose and enforce noncompete agreements. The common defense of these restrictive agreements is that they are necessary to protect trade secrets and confidential information, promote innovation, and protect employer’s investment in employee training and human capital.

However, Brian Callaci, an economist whose research focuses on market structures, industrial organization, and the power dynamics between worker and employer, said to the [F]law, “employers already have trade secret laws to protect those interests. They do not need the extra tool of a noncompete, which has harmful extraneous effects on workers and the economy.”

There are many federal laws that protect employer interests in confidentiality and unauthorized use of protected trade secrets including the Uniform Trade Secrets Act and the Economic Espionage Act. There are also state laws and regulations that protect similar issues as well as common law protections of company information. The law is well-structured to protect employer and corporate interests without the need for noncompete agreements. 

On the claim that noncompete clauses promote innovation, evidence supports the contrary. Researchers have generally found that noncompete clauses decrease innovation. One study found that when noncompete clauses are more enforceable, rates of entrepreneurship, patenting, and employment growth slow. Another study found that when noncompete clause enforceability is increased, the entry rate of new firms decreased by 10 percent in the technology sector and the professional, scientific, and technical services sector. An additional study established further that noncompete clauses not only inhibit new business formation but they also tend to have more negative impacts for women than for men.

The widespread deployment of noncompete clauses against workers contributes to America’s downward trend in new business formation, productivity, and technological innovation.

Additionally, if return on investment through employee retainment is the goal, “the other way of protecting the employer’s interests is for the employer to prevent workers from leaving with a carrot rather than a stick—make it a nice place to work, pay workers well, offer a pension to incentivize them to stay. There are all those other ways to do it rather than the brute force approach of a noncompete,” said Callaci.

While the common refrain is that these restrictive agreements are an essential tool to protect trade secrets, for some employers, noncompete agreements are more likely to be an essential tool to protect profit margins and preserve unequal bargaining power against workers. Researchers found that employers of low-wage workers rely on noncompete agreements more often when they lose other means of suppressing wages, for example when minimum wage laws increase, unemployment decreases, and workers enjoy a tighter labor market. The findings also show that firms will utilize noncompetes in some instances “despite the fact that the costs borne by an employee outweigh the benefits the employer receives.” Power, profits, and control are at the heart of noncompete agreements. 

The underlying narrative for proponents of noncompete agreements is that workers consent to the restrictions imposed on them. The

Headshot image of David Seligman.

David Seligman

Chamber of Commerce, , a pro-business lobbying organization with offices across the country, wrote in 2020, “[i]t is important to note that noncompete contracts are not unilaterally imposed on employees. They are contracts freely bargained for before or during a period of employment. The employee gains something valuable in exchange for the voluntary commitment.”

In response to this narrative of consent and contract, David Seligman, Executive Director and an attorney at Towards Justice, a nonprofit impact litigation law firm, said to the [F]law, “The notion of a purported freedom of contract is a complete fiction. It does not line up at all with the experience of workers.”

“Contract is not about consent.” Seligman continued, “contract has been weaponized, and that is what we are seeing with the noncompete—contract as a weapon to coerce and attack workers, not something they can freely negotiate and set terms for a relationship that are reasonable to them.”

Responding to the Chamber of Commerce’s claim, Callaci said to the [F]law, “employment contracts are typically take-it-or-leave-it contracts. Employment contracts are not bargained over equally, and if the Chamber wants to have contracts that are bargained for, they should be for the expansion of union rights and they should be lobbying for the PRO Act. That is the way workers will actually be able to bargain over contracts. The employer holds enormous power in the hiring process… It’s unrealistic to view these as bilateral contracts.”

Contrary to the idyllic rendering presented by the Chamber of Commerce, noncompete clauses are often included in standard-form contracts, which workers are not likely to read and are rarely negotiated over. Worsening the already uneven bargaining power at play, while these agreements are often crafted by employers’ legal counsel, only 7.9 percent of workers with noncompete clauses reported consulting a lawyer to review their contractual noncompete obligations. 

“An empty stomach can make no contracts. They assent but they do not consent, they submit but they do not agree.”

For the workers living paycheck to paycheck, for the employees who depend on their income to pay their bills and put food on the table, the loss of a job opportunity is not a viable option either. Under the pressure of need and with little opportunity for meaningful choice, workers sign noncompete agreements. 

As George E. McNeill, nineteenth century labor theorist, asserted, “An empty stomach can make no contracts. They assent but they do not consent, they submit but they do not agree.”

The story itself, in which two parties come to the table to negotiate over a noncompete agreement, has been observed to be more mythological than fact. Studies have found that employers do not always provide noncompete agreements in the normal contract process. Instead, it is common practice of employers to request workers agree to a noncompete after they have already accepted the employment offer and begun work—a time when a worker’s negotiating power is at an even weaker level. 

Other common practices include placing the noncompete agreement among the many other boiler plate forms new employees sign on the first day of work or tucking the noncompete restriction inside a lengthy employee handbook that employees unconditionally agree to abide by as a condition of their employment. As such, researchers at the Economic Policy Institute found that large numbers of employees do not even know they are subject to noncompete restrictions.

Regardless of these realities, in justifying the continued use of noncompete agreements, the narrative of consent and vague gestures to freedom of contract are mobilized by some and enchanting for others.

Noncompetes in the Landscape of Disempowered and Traumatized Workers

Testifying before Congress in 1997, Alan Greenspan, then Chair of the Federal Reserve, explained that the gap between productivity gains and wage growth has been a blessing for the economy as, in his view, “employment insecurity” kept inflation down while the economy continued to grow. According to Greenspan, “heightened job insecurity explains a significant part of the restraint on compensation and the consequent muted price inflation.” Greenspan famously described this as the reliance on “traumatized workers.” 

 “[This] is still a prevailing view, even if it is not verbalized that way,” Sandeep Vaheesan said to the [F]law. “They are expressing employer perspective on these issues. They want an obedient, pliant workforce where people are not making demands, where people are not asking for higher wages and fair treatment. Instead, they want an economy, and this is the economy we’ve had for 40 plus years now where people feel grateful to have a job—they just keep their heads down and do the work and accept all sorts of abuse and mistreatment.”

The noncompete clause is one mechanism of many that maintains the American economy of “traumatized workers.” 

They want an obedient, pliant workforce where people are not making demands, where people are not asking for higher wages and fair treatment.

The proliferation of noncompete agreements is not a neutral, naturally occurring phenomenon. Instead, the increased prevalence of noncompete agreements flourishes within the fertile context of neoliberal politics, de-unionization, contracted away rights, and disempowered workers. 

“[Noncompete agreements] are part of the broader shift in power away from working people and in favor of the employer class,” said Vaheesan. 

The harms imposed by noncompetes are best understood within the broader American landscape of unequal bargaining power, trauma, and job insecurity.

Since the 1970s, the New Deal social contract—through which American workers unionized and the disparity in power between employers and employees compressed—has largely been shredded. While this social contract was by no means perfect in its racially exclusionary and inequitable tendencies, it did place constraints on corporate power and enabled workers to exercise modest countervailing power with the backing of the government. In the past half century, that countervailing worker power has been radically diminished.

The decline of unions is a critical factor in the experience of the worker in America and in the rising economic inequality in society. The steady erosion of union coverage is the result of anti-labor judicial decisions and a policy assault on workers’ right to effectively organize. The share of workers who could collectively bargain for wages, conditions, and benefits has collapsed in the past few decades.

Graph showing the decline in union membership and rise in income of the top 10%.

Source: Economic Policy Institute

At the lower end of the income distribution, lagging minimum wage laws reinforced the fragility of the working class. The federal minimum wage is roughly 25 percent lower in inflation-adjusted terms than it was at its height in 1968. 

Without governmental intervention, the trends of globalization and market consolidation further degraded worker power as they respectively increased low-wage competition with foreign sources of labor while also increasing employer’s relative power in the domestic labor market where workers are captives in uncompetitive markets. 

The current rise of the gig economy is built on this continued erosion of worker power as employers misclassify workers as independent contractors, precluding these workers from the benefits and provisions that would once have been their right as full-time employees. The combination of de-unionization, lagging minimum wage laws, and policy choices contributed to widespread wage stagnation. Since 1979, the bottom 90 percent of the American workforce has seen their pay shrink radically as a share of total income while the gap between productivity and compensation grew dramatically.

raph showing the decline in income of the bottom 90% as a share of total income

Source: Economic Policy Institute

The divergent gap between the growth of compensation for the typical U.S. worker and the growth in economy-wide productivity reveals a nation in which economic gains are largely being captured by those at the top of the income distribution, leaving most workers behind.

Graph showing the gap between productivity and a typical workers compensation

Source: Economic Policy Institute

The relentless narrowing of worker power through anti-worker policies and court decisions has emboldened employers to innovate their employment contracts, deploying contract law and the narrative of consent to force employees to contract away their rights. 

While a noncompete agreement obstructs a worker’s right to leave the workplace, an arbitration clause diminishes a worker’s ability to voice their discontent within the workplace itself. 

Where an employee could once bring their grievances forward and take their employer to court for the damages and harms suffered in the workplace, employers, with the blessing from Congress and the courts, commonly strip employees of this right through arbitration agreements. Arbitration agreements often bar employees from bringing claims for workers’ rights violations to state or federal court. One consequence of the use of these agreements is that the amount of anti-discrimination litigation brought to court has significantly decreased. 

Given the widespread use of “boiler plate contracts,” or contracts that contain several of these now-generic copy-and-paste clauses, noncompete and arbitration agreements are standard in the take-it-or-leave-it employment contract norm of today. A study from the Economic Policy Institute by Alexander J.S. Colvin found that, in 1992, just 2 percent of workers were contractually subjected to forced, mandatory arbitration. By 2018, 56.2 percent of private-sector non-union employees, or roughly 60 million employees, were subject to these mandatory arbitration agreements.

Noncompete agreements are a fundamental feature of this American landscape in which workers are expected to not air their grievances, expected to accept their unequal bargaining power, and expected to endure the trauma of job insecurity and unemployment.

Kevin and Larisa Borowske tried to navigate this landscape, but they learned that the system was not constructed for their success but rather it was built to impose their trauma. The couple took jobs as caretakers with FirstService in 2014 and earned about $8 an hour to maintain the common areas of a downtown high-rise in Minneapolis. They vacuumed the hallways, maintained the pool and hot tub, and responded to residents’ concerns and requests around the clock, from the morning through the night. Because of the 24-hour nature of their work, they were provided living quarters in the residential building that they managed. 

Noncompete agreements are a fundamental feature of this American landscape in which workers are expected to not air their grievances, expected to accept their unequal bargaining power, and expected to endure the trauma of job insecurity and unemployment.

Although their wages have increased along with Minnesota’s minimum wage laws, FirstService did not fully pay the Borowskes what they were owed. The company withheld from the Borowskes, along with close to a hundred other employees, their overtime wages for years. Mr. Borowske filed a class action lawsuit against his employer for wage theft and the unpaid compensation he was owed. The company settled the suit for $250,000, of which $150,000 was divided among the 100 caretakers owed. 

Subsequently, in October 2022, Mr. Borowske led a unionization effort and was among the 300 maintenance and desk attendants who went on an unfair labor practice strike in Minneapolis. 

Not long after, FirstService fired both Kevin and Larisa. Neither Kevin nor Larisa had any history of disciplinary actions against them before the firing. Because their housing was secured through their work, the Borowskes not only lost their jobs, but they also lost their home where they lived for the past nine years. SEIU Local 26, the union representing FirstService caretakers and desk attendants, alleges the termination is illegal retaliation against protected labor organizing. FirstService denies the allegations. 

In an instant, the Borowskes were uprooted and without any income. To make matters worse, the contract the Borowskes originally signed to earn $8 an hour included a noncompete clause stipulating that they may not work for “any management company serving condominium associations, homeowner associations, or cooperatives … in the Twin Cities Metropolitan Area” for a year after leaving the company.

“FirstService fired us, forced us from our home, and told us we cannot make a living in our field for the next year… [Noncompetes] force workers to stay at companies instead of taking better offers and holds down people’s chances to make a living when they leave.” Borowske continued, “it is another way that corporations are rigging the system to make sure workers cannot seek out better pay and conditions.” 

Although they have been offered work and are aware of employment opportunities, the Borowskes were unable to accept and left in fear of the potential for a lawsuit. 

“I’m afraid to take it, because FirstService can sue me,” Mr. Borowske said.

Kevin and Larisa are now among the traumatized workers that America’s economy supposedly relies upon.

The Patchwork of State-Level Laws

Some states, recognizing the harm and widespread use of noncompete agreements, have passed laws to regulate or prohibit noncompete agreements. State laws that limit noncompetes generally fall into one of three main categories: laws that eliminate noncompetes for everyone, laws that eliminate noncompetes for some based on occupation or income, and laws that limit the enforceability of noncompetes. Some more conservative state governments, for example Georgia, have passed laws empowering the use of noncompetes, making them more enforceable against workers. 

Workers in states that passed laws to limit noncompetes have enjoyed benefits. When Oregon stopped enforcing noncompete clauses for hourly wage workers, their wages increased by 2 to 3 percent, relative to workers in states which did not enact reforms. Wage increases were observed to be higher in occupations that used noncompete clauses at relatively higher rates. Similarly, when Hawaii stopped enforcing noncompete clauses for high-tech workers, earnings of new hires increased by roughly 4 percent.

However, this patchwork of state-level reforms is not without holes and avoidable harms. State solutions often exclude certain workers, fail to prevent spillover effects from states that increase the enforceability of noncompetes, and often rely on inefficient enforcement mechanisms. 

One study found that increases in noncompete clause enforceability in one state has negative impacts on workers’ earnings in bordering states. In fact, the negative effects are nearly as large in the neighboring states as the effects in the state in which enforceability of noncompetes increased.

California, where noncompetes have been unenforceable for over a century, has a private enforcement regime in which workers must bear the burden and costs of bringing claims forward against employers unlawfully using noncompete agreements. Access to the legal system, knowledge of the law, financial resources, and unequal power all form barriers to California’s attempt to address noncompete harms. 

As a result, employers in California still regularly impose unlawful noncompete agreements on employees despite their unenforceability. The legality of these agreements is of no consequence or concern for these employers. The purpose is power.

The restrictive agreements are not meant to be legally binding or upheld in court. They are only meant to apply pressure on workers, foster fear of costly litigation, and effectuate an employer’s power and control over the employee. Whether workers wrongfully assume such agreements are valid or simply cannot afford the risk of expensive litigation, the chilling effect and intimidation of these unenforceable agreements is nonetheless real. 

“The point of these terms in contracts which the employer knows would never be enforced in court … is to intimidate workers, to scare them, to coerce them,” Seligman said to the [F]law.

For Seligman, the corporate lawyers who encourage clients to present these unlawful terms to workers should be held accountable for their unethical practices. Overall, “the pervasiveness of illegal noncompete agreements highlights why we need more affirmative enforcement in this space,” said Seligman.

The legality of these agreements is of no consequence or concern for these employers. The purpose is power.

Even when a worker has the courage and resources to take their employer to court in states that regulate or prohibit noncompete agreements, employers who illegally use restrictive noncompete agreements rarely face sanctions, such as monetary damages. Courts typically rule that the noncompete agreement is unenforceable or they limit the expansive scope of the restrictions. As a result, employers rarely face strong disincentives to including unlawfully restrictive agreements that harm employees. 

In the absence of federal lawmaking, the patchwork of laws and regulations continues to leave workers burdened and subject to harm with little effective recourse to assert their right to be free from such restrictions. 

A New Day Dawns for Economic Liberty and Worker Rights

On January 5, 2023, the Federal Trade Commission (FTC) announced a new rule proposal to nationally “ban employers from imposing noncompete agreements on their workers.” 

According to the Chair of the FTC, Lina M. Kahn, “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy. Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”

As of right now, the FTC brings individual cases against employers using unlawful noncompetes. The FTC issued the notice of proposed rulemaking to proactively ban such practices pursuant to Section 5 of the Federal Trade Commission Act (“FTC Act”) which declares “unfair methods of competition” to be unlawful and directs the Commission “to prevent persons, partnerships, or corporations . . . from using unfair methods of competition in or affecting commerce.” 

Additionally, the FTC’s rule proposal addresses the enforcement problem seen in California by providing a public enforcement mechanism that does not rely on workers bringing litigation forward while also including a critical requirement that employers must both rescind existing noncompetes and actively inform workers that they are no longer bound by the unenforceable noncompete. 

The FTC claimed that the proposed rule will “increase workers’ earnings across industries and job levels by $250 billion to $296 billion per year” and cited research finding that the ban would narrow the racial and gender wage gaps by 3.6 to 9.1 percent. 

Accordingly, a full nationwide ban on noncompetes has been estimated to increase average earnings by 3.3 to 13.9 percent. Further, without the burdens of noncompetes, research indicates that workers will have greater leverage in negotiations during periods of low unemployment. 

The FTC voted 3-1 in favor of the Notice of Proposed Rulemaking, with Commissioner Christine S. Wilson, who was appointed by President Donald J. Trump and confirmed in 2018, as the lone dissenter. Commissioner Wilson stepped down from her position on March 31, 2023. 

The rule proposal is one step in the required, lengthy rulemaking process, and the proposed ban faces a long road ahead before taking effect. Nevertheless, it comes as part of the current movement to revitalize the anti-monopoly, pro-competition tradition in American policy that has been relentlessly repressed and kept dormant in the last half-century. 

Pain and Profiteering: The Prevalence of Noncompetes in Healthcare

Adding to the urgency and justification for a ban on noncompete agreemetns, the FTC’s fact sheet accompanying the rule proposal places a specific emphasis on the effect that noncompetes have in the healthcare industry, asserting that the proposed rule, if adopted, would “[s]ave consumers up to $148 billion annually on health care costs.”

The FTC’s emphasis on the healthcare industry may reflect the prevalent use of noncompete agreements against healthcare practitioners. One multi-state study found that approximately 45 percent of primary care doctors are subject to noncompetes. 

The benefits of a ban on noncompete agreements extend beyond the potential savings for patients given the widespread use of these restrictive obligations in the industry. 

For Dr. Sameer Braig, an internal medicine specialist in Florida, “noncompetes, particularly in medicine, solely serve the interests of corporations while harming Americans.” Dr. Braig, providing comment at a public forum hosted by the FTC, said “noncompete agreements allow healthcare corporations to create oligopolies by carving out territories, not much different than drug cartels. The motive is purely to ensure egregious profiteering.”

“Noncompetes completely suppress competition, decrease access to physicians, and lead to worse patient outcomes—that means more avoidable suffering, more avoidable death, and exponentially higher healthcare costs.”

Citing to the consolidation of the healthcare industry and overwhelming ownership involvement of private equity firms, Dr. Braig claimed that “the magnitude of the effect of noncompetes has never been greater than it is today. Noncompetes completely suppress competition, decrease access to physicians, and lead to worse patient outcomes—that means more avoidable suffering, more avoidable death, and exponentially higher healthcare costs.”

For Dr. Braig, noncompetes lock doctors in, providing large healthcare employers the power to exploit physicians and overwork them. The downstream effects in turn contribute to healthcare deserts in underserved areas and the artificial physician shortage.

Dr. Jonathan Jones, an emergency physician in Jackson, Mississippi and President of the American Academy of Emergency Medicine, echoed this account of the harmful effects that noncompete agreements have on the workplace which ultimately ripple and result in risks to patients. According to Dr. Jones, “noncompetes serve to intimidate physicians, specifically to intimidate physicians not to speak up about potentially dangerous practices to patients.”

Healthcare practitioners that leave their previous employment for better opportunities must navigate the financial risk of lawsuits and the burdens of compliance with excessively restrictive noncompete agreements.

Jennifer Brown was one of three Wyoming nurses sued by their previous employer for violating their noncompete agreements. A state judge ordered the nurses to cease providing home health care to patients, forcing them to find new employment that complies with the restrictions of the noncompete. As a result, Brown, who at the time had sole custody of her then-one-year-old granddaughter, had to commute over two hours to find a job outside of the radius proscribed by the noncompete agreement. The new employment not only paid less, but it also made it difficult for Brown to find childcare to accommodate a long workday which was made even longer by the commute.

“Not only did they take away my means to support myself—they took away my means to feed my granddaughter. As a nurse, I should never have that problem.”

“I burned through all my savings, and I got to the point where I had a roommate to pay the bills,” Brown said. “Not only did they take away my means to support myself—they took away my means to feed my granddaughter. As a nurse, I should never have that problem.”

The Wyoming Supreme Court eventually overruled the decision against Brown, but the financial strain, lost wages, and stress from the experience had already taken a heavy toll. 

Doctors, healthcare practitioners, nurses, and associations of healthcare workers have voiced their support for the FTC’s rule proposal.

Popular Support and Corporate Opposition

A majority of the American public supports the FTC’s rule proposal to ban noncompete agreements. According to polling conducted by Ipsos the day after the rule proposal was announced, three in five Americans (61 percent), including two-thirds of those who are currently employed (66 percent), support the FTC’s proposed ban on non-competes. Two in five employed Americans even responded that they are more likely to look for a new job if the FTC’s rule banning noncompete clauses is issued. 

Despite the popular support, corporate and employer interests have already mobilized in opposition to the rule proposal. Lobbying records reveal corporate interests are positioning themselves to intervene. A leader of this opposition is the Chamber of Commerce.

“This is the start of the big fight,” Vaheesan said to the [F]law. “Employers and their trade associations are strongly opposed to this rule—they want to be able to keep using noncompete clauses. They would rather keep workers by using noncompetes than by paying them better or offering better benefits and treating workers with dignity and respect. I’m not saying that’s true of all employers, but unfortunately that is true of many employers.”

The lone dissenter of the agency’s proposed action, former FTC Commissioner Wilson, signaled that the final rule will likely face legal challenges in court.

For Vaheesan, this is expected. “I have no doubt that the Chamber of Commerce and other big business interests are going to throw the kitchen sink at this rule and see what sticks.” 

These business and corporate interests may find a warm welcome for their challenge to the proposal. 

Vaheesan said, “The courts are hostile to progressive administrative action, and I should underscore progressive. They are not hostile to administrative action in general. It is particular types of administrative actions and things that will help workers, consumers, small businesses, and protect the environment… that they have in their crosshairs.” 

Nevertheless, Vaheesan argues that, for a court, this should be a simple case of an agency exercising its permissible and clearly delegated authority. For Vaheesan, a court need only look at the FTC’s long history of regulating restraints to trade within which noncompetes fit comfortably as well as the text of the statute providing the FTC with rulemaking authority, because the “language is as clear and unambiguous as it gets.”

“They would rather keep workers by using noncompetes than by paying them better or offering better benefits and treating workers with dignity and respect. I’m not saying that’s true of all employers, but unfortunately that is true of many employers.”

The statutory language in question is found in Section 6 of the FTC Act, which provides the agency with a clear and broad grant of rulemaking authority. Section 6(g) enables the agency to “make rules and regulations for the purpose of carrying out the provisions” of the law. Further, Section 18 of the Magnuson-Moss Act explicitly preserves “any authority of the [FTC] to prescribe rules (including interpretive rules), and general statements of policy, with respect to unfair methods of competition in or affecting commerce.” 

However, the caveat is that this is a simple case for a court that adheres to its professed principles of relying on the text rather than its desired conservative outcomes.

The Path Forward: The Right to Change Jobs and The Freedom of Economic Mobility 

Regardless of whether the final rule is challenged, the rule proposal reflects a governmental effort to break the bonds of indifference, to lift its weight off the scales of power that has long tilted in favor of business interests, and to breathe new life into economic liberty and worker rights.

The Supreme Court, at one time, recognized, “When the master can compel, and the laborer cannot escape, the obligation to go on, there is no power below to redress, and no incentive above to relieve, a harsh overlordship or unwholesome conditions of work.” That Court described a “right to change employers” as the fundamental “defense against oppressive hours, pay, working conditions, or treatment.”

Noncompetes bludgeon and burden this right, and with it the worker’s ability to demand better wages, negotiate for better working conditions, and resist oppressive conditions in their current job.

Shelbie Brennen, who fought back against her restrictive noncompete for her family and for herself, said to the [F]law, “The whole point of America and democracy is for you to be able to do your own thing, move on, build yourself up, potentially getting to the point of owning your own business and thriving. That is the whole point of it. So why hinder that?”

Just as noncompetes are only one tool of many so too can the ban on noncompetes only be the first step of many. “This rule alone is not going to fix American labor markets. I am under no illusions about that, but it is an important step toward making the economy more worker friendly because it has been boss friendly for far too long,” said Vaheesan.

Shelbie Brennen had one message for those under threat and in fear of noncompetes and corporate power: “stand your ground.”

Luke Hinrichs

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