IU labor expert looks at proposed non-compete ban
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The U.S. Federal Trade Commission has proposed a new rule that would ban employers from imposing non-compete agreements on their workers. Advocates of the rule say non-competes are a widespread and often exploitative practice that suppresses wages and hampers innovation. Indiana University Professor of Labor and Employment Law Kenneth Dau-Schmidt says current estimates suggest about 20% of the American workforce is covered by NCAs.
In an interview with the Associated Press, Dau-Schmidt said the proposed rule could make it easier for people to switch jobs and deepen competition for labor across a wide range of industries.
“Our American economy is based on the idea that everybody competes. Employers have to compete for employees. And what this rule is trying to do is trying to preserve that competition,” said Dau-Schmidt.
Dau-Schmidt says non-compete agreements were intended protect companies when a high-level executive or research personnel with access to sensitive information, leaves a company. But he says in recent years, employers have been applying NCAs more broadly.
“We’ve seen cases where they’ve been applied to sandwich makers, we’ve seen cases applied to janitorial employee, security employees, even to unpaid volunteers or interns, which is it’s amazing,” said Dau-Schmidt.
He says almost 50% of the American workforce will be covered by a non-compete at some time during their career.
“And this is beginning to have a negative impact on our labor markets. When people are covered by non competes. It limits what jobs they can apply for it limits whether other employers will look at them. As a result, they have less opportunities,” Dau-Schmidt added.
The FTC is seeking public comment on the proposed rule, which gives stakeholders, such as business groups, 60 days to provide feedback the agency.
The comment period is open through March 10.
“They have already made some comments that they believe this rule exceeds the Federal Trade Commission’s authority,” said Dau-Schmidt.
He expects the FTC will make some sort of adjustments. For instance, Dau-Schmdit says they could prohibit non competes for employees who make less than $100,000 a year.
“And then they would apply a “rule of reason’ for employees above that, in other words, the employer would have to show some kind of some kind of legitimate interest and that this was necessary,” explained Dau-Schmidt.
Click here to learn more about the proposed rule.