Eli Hartman/Odessa American via AP
Matthew Speer works to fell a pine tree, December 16, 2021, in Odessa, Texas.
One of the most far-reaching and beneficial-to-actual-existing-Americans rulings of the Federal Trade Commission is its ban on noncompete agreements. Those agreements, commonly slipped into employment contracts, ban employees from going to work for a competitor in the same field or same region, or from starting up their own business in that field, for a specified amount of time after leaving their employer. They generally stipulate that such departed employees must pay that employer a substantial amount of money if they violate that ban.
The ostensible purpose of such noncompetes is to protect companies’ trade secrets. However, they now cover roughly 20 percent of American workers according to the FTC (and well more than that according to a survey by the Economic Policy Institute), which means that countless barbershops, hardware stores, pet-walking services, and sundry mom-and-pops must be harboring trade secrets as vigilantly as the CIA (where leaking is subject to draconian punishment and yet still happens, but I digress).
The FTC’s ruling is set to take effect on September 4, but that appears to depend on what part of the country you live in. Earlier this month, a U.S. district court judge in Texas (where all regulations go to die) granted a preliminary injunction against the FTC ruling in a case brought by the U.S. Chamber of Commerce, among others. That judge promised a final decision by August. Last week, however, another U.S. district court judge, this one in Pennsylvania, denied a company’s request for a preliminary injunction, saying that the rule would likely pass muster when she delivered her final decision, as the company had not produced evidence that it would suffer irreparable harm if the noncompete ban took effect. As the Texas injunction applies only to the particular litigant, however, the expected nullification of the FTC rule will only affect the Chamber itself. Given these opposing rulings, these cases will likely wend their ways up the judicial chain until they probably reach the Supremes.
It’s worth considering the particulars of the Pennsylvania company’s case. The company that contested the FTC is ATS Tree Services, which is a tree-removal company. As best I can figure, people have been chopping down trees for thousands of years, and if ATS has devised a radical new way of doing that, it would surely seem to have a case. Perhaps it employs a massive hot air balloon affixed to the tree as soon as it is severed from its base, so rather than crashing down it is hoisted high in the air and allowed to drift harmlessly until eventually dropped. Perhaps the company bores a hole in the middle of the tree and inserts some beavers, or termites, hoping they will chew their way out and topple the tree in the process.
Striking down noncompetes, save for those few employees who really do have trade secrets, is not only good economic policy, it’s also good political practice.
More likely, I admit, the company’s case was probably that they trained their workers to cut down trees and didn’t want them to go into business for themselves once they learned the skill. But these are precisely the kind of skills that have been passed down in countless occupations and cultures without restricting their spread. Imagine what would have happened if 18th- and 19th-century Americans, both real and legendary, had been stopped from building log cabins and rail fences because some primordial tree-cutting monopoly with a helluva noncompete clause and expensive lawyers had stood in their way. (For that matter, the American Industrial Revolution was sparked in part by a Brit who immigrated to the U.S. carrying several key textile technologies with him.)
Striking down noncompetes save for those few employees who really do have trade secrets—and there are already laws on the books that protect genuine trade secrets—is not only good economic policy, it’s also good political practice. As to economic impact, the success of Silicon Valley and the development of the tech products on which we all rely is due in no small part to the fact that tech companies have not required their workers to sign noncompete agreements. (Indeed, they’re against the law in California.) That has led to a constant circulation of tech workers from company to company, from startup to startup, which in turn has led to countless tech and economic advances (and some real glitches, too, but that’s another story).
We should note as well that none of the lawyers or economists who view the FTC’s ban as an infringement of the state against the private sector themselves labor under such agreements. At that level, at least, they understand that noncompetes stifle initiative and innovation, if only their own, and in aggregate, therefore, harm the overall economy.
My guess—and it’s purely a guess—is that most loggers and lumberjacks, being normal if somewhat adventurous people, didn’t bother to read the small print on their contracts, which may have banned them from going off and cutting down trees on their own or for somebody else. I suspect the same is true of the vast majority of blue-collar and service and retail sector workers who, unbeknownst to them, are subject to such clauses, too.
And since elections are usually won through the votes of normal people such as these, this is precisely the kind of issue that Democrats should be highlighting between now and November. After all, it was the Democratic appointees on the FTC who voted to ban noncompetes, and the general counsel of the National Labor Relations Board (also a Democratic appointee) who is seeking a similar ruling. As the Democrats control the Senate, it wouldn’t be a bad idea for Chuck Schumer to force a vote on this and kindred measures, like mandating heat breaks for workers toiling through this blistering summer (as some Texas cities have done, only to be overridden by the state’s ferociously far-right legislature).
Some of the non-normal super-rich who tend to support Democrats and are currently supporting Kamala Harris’s presidential bid, such as media mogul Barry Diller and LinkedIn pooh-bah Reid Hoffman, are calling on her to pledge that she’ll dump FTC Chair Lina Kahn, the prime mover of the noncompete ban and other policies in the public interest. Unless Harris wants to undercut the legacy and ethos of the administration in which she’s served and the economic perspectives of the mainstream of the Democratic Party, and bolster Donald Trump’s claims that the Democrats are populist-sounding hypocrites really controlled by the very rich, she should soundly and very audibly repudiate these billionaires.
When people want their trees cut down, Democrats (some gazillionaires excepted) believe that a qualified logger should be able to do it, free from the constraints of noncompetes. If Republicans (and gazillionaires) object, well, let ’em.
