Court handcuffs employees with non-compete agreements — again

I hate non-compete contracts — and I’m not alone. They restrict workers’ ability to move from job to job, which in turn reduces salaries. The only way I ever got a significant raise during my career was when I changed employers. So, when the US Federal Trade Commission (FTC) banned non-compete agreements, I, and a few million employees, were pleased as punch. 

That happiness was brief. Before the ban could even take effect on Sept. 4 (two days after Labor Day in the US), District Court Judge Ada Brown in Dallas stopped the FTC from enforcing it, saying the move “exceeded its statutory authority,” was “arbitrary and capricious” and would have caused businesses “irreparable harm.” 

Yeah. Right. 

I’ve been an employee, a freelancer, and I’ve owned small businesses. Non-compete agreements have only hurt me in the first two cases, and I never found a reason as a boss for requiring my employees to sign a non-compete contract clause.

I know there are times when these agreements do make sense. If I invented a better mouse trap, I wouldn’t want my engineers taking the cheese to rival Acme Giant Mouse Trap Inc.  But more often than not, the non-compete clauses I’ve seen are just there to trap employees.  

You might think these things are only a pain for people like me who work in the tech and creative space. You’d be wrong. Employees also locked into their jobs include hairdressers, janitors, security guards, and fast-food workers. Who knew that the ability to say, “Would you like fries with that?” was proprietary? Not me.

Altogether, the FTC estimated that the ban could increase workers’ earnings by at least $400 billion over the next decade, affecting about 30 million American workers. It was a nice dream while it lasted. 

Essentially, Brown ruled that the federal agency lacked the statutory authority to enact such a sweeping ban and violated the US Administrative Procedures Act. She  emphasized that Congress or individual states, not federal agencies, are the organizations that can regulate non-compete agreements.

This is all part of an overriding conservative legal argument that federal agencies have minimal powers. That wasn’t always the case.

For decades, a Supreme Court ruling in the 1984 case, Natural Resources Defense Council, required federal courts to defer to an agency’s reasonable interpretation of an ambiguous statute that the agency was tasked with administering. This became known as the Chevron Doctrine. 

I favored Chevron because, while I’m no lawyer, I know enough about regulatory law to know that the “law” usually only offers general guidelines on difficult, detailed issues. If you think, for example, your average Congresscritter has a clue about how, say, net neutrality really works, think again. The Federal Communications Commission (FCC) and FTC have the experts to nail the specifics; Congress doesn’t — and neither does your state legislature. 

Unfortunately, the Trump-appointee-dominated Supreme Court trashed Chevron with this year’s Loper Bright decision. And it doesn’t put the ball back in Congress’s court to make incredibly detailed laws. As the Cleary Gottlieb law firm put it, it’s now up to “federal courts to draw their own conclusions about the correct legal interpretation of otherwise ambiguous federal statutes.”

Oh boy, judges will now get the final say on setting detailed policy. I’m thrilled. This is just another chapter in the ongoing debate over the balance of power between federal agencies and the judiciary. Given how the courts, especially the Supreme Court, have been ruling lately, I’m not a happy camper.  

The FTC isn’t happy, either. I expect it will appeal. (I don’t have high hopes for their chances with the current Supreme Court.) In any case, the FTC will continue to address non-compete agreements through case-by-case enforcement actions. The chances it will have much success are slim, but we live in hope. 

While the FTC contemplates its next steps, businesses and employees remain in a state of limbo regarding the fate of non-compete agreements. I expect businesses will hang on to their agreements until the FTC or the courts pry their cold dead fingers off them. 

Non-compete deals, like their mirror “at-will employment laws, which give companies the right to fire employees for no reason whatsoever except for a few specific situations, put all the power in employers’ hands. It’s not fair, and it’s not right. Workers deserve the right to get the best possible deal for their labor and some semblance of job security. 

Is that too much to ask for? It appears that in the United States, at least for now, it is.