Federal Trade Commission Chairwoman Lina Khan visited Hartford on Friday to speak with union leaders, state lawmakers and worker advocates about her agency’s new ban on so-called “non-compete” language in labor contracts.
The rule, finalized earlier this year, prohibits non-compete clauses, which are commonly used in a variety of industries to prevent employees from going to work for another employer in the same field. The ban also makes most existing non-compete clauses unenforceable (with exceptions for some top executives) and employers must notify workers that they are unenforceable. The rule is scheduled to go into effect in early September, but legal challenges could block it.
But even if the ban goes into effect, there are some industries and employers that will not be subject to the ban. State lawmakers and Connecticut‘s congressional delegation have proposed broader bans, but those efforts have so far fallen short.
Nonprofit organizations, including hospitals, are not under the jurisdiction of the FTC. Khan said banks and transport companies would also not be covered. “There will be a gap. And that is where we believe state authorities and others can also intervene,” Khan said.
The FTC rule, when it takes effect, “would create a floor,” Khan said. State laws could go further than that.
Non-compete agreements originated as a way to prevent former employees from sharing confidential and proprietary information, and tended to focus on high-level employees who had access to a company’s trade secrets.
“But they have really proliferated,” Khan said at Friday’s roundtable, which was held at the headquarters of the 32BJ SEIU service workers union. “When we start looking at this issue, you realize we’re talking about fast food workers, security guards, janitors, gardeners, journalists and healthcare workers.”
According to the FTC, approximately 30 million American workers are now subject to non-compete agreements. The agency has argued that non-compete clauses stifle competition in the labor market and, as the practice has spread to a broader range of industries, the agreements have kept wages low for workers who have little or no influence to negotiate or move to a higher position. salary.
The language varies by company and industry. It could prevent an employee from working for a competitor for a specific period of time. Some expire during the worker’s tenure, but many endure regardless of the length of employment, even if that worker is fired.
Critics of the ban argue that the FTC does not have the legal authority to implement its rule. Shortly after the FTC announced the final rule in April, pro-business groups, including the U.S. Chamber of Commerce, sued to block it.
In a statement at the time, House President and CEO Suzanne P. Clark called the ban “not only illegal but also a blatant power grab that will undermine the ability of American businesses to remain competitive.” Clark added: “This decision sets a dangerous precedent for government micromanagement of businesses and can harm employers, workers and our economy.”
The House lawsuit was stayed in May to allow a similar complaint filed earlier by a tax services company to go forward. The House has since stepped in to join that lawsuit, filing a brief earlier this week asking the court to stay the effective date of the noncompete ban and issue a preliminary injunction.
“Depending on what happens in (the courts), it’s really important to have state laws,” Terri Gerstein, director of the Wagner Labor Initiative at New York University’s school of public service, said at Friday’s roundtable. “The FTC rule is a very powerful and important step, but I don’t think it eliminates the need for action at the state level.”
Addressing state lawmakers in the room, which included Sens. Jorge Cabrera, D-Hamden, and Jeff Gordon, R-Woodstock, as well as Reps. Manny Sánchez, D-New Britain, and Josh Elliot, D-Hamden, Khan offered his agency’s support.
“We do things like write letters supporting various types of legislation. We have even sent FTC personnel to testify,” she said. “We have a lot of advocacy tools that we can use to support state efforts as well, so don’t hesitate to reach out if there’s anything along those lines.”
U.S. Senators Chris Murphy and Richard Blumenthal also attended Friday’s roundtable. Murphy pointed to federal legislation he introduced that seeks to limit non-compete clauses in employment contracts. He said the effort is ongoing.
“We continue to apply federal legislation. Our legislation is bipartisan and continues to gain support on both sides of the aisle,” Murphy said. “Obviously, the sponsors of this legislation are very supportive of what the FTC is doing, but we want to back it up with laws that cover administrations.”
Murphy said the risk with the FTC setting rules is that a new presidential administration could roll back those regulations.
“Our law would be permanent,” he said.
Keynote USA
For the Latest Local News, Follow Keynote USA Local on Twitter.