Earlier this year, the Federal Trade Commission proposed a historic ban on noncompete agreements, which would outlaw companies from preventing their workers from taking jobs at competing firms. But there are several major fields, including the airline industry, where the FTC may not have the authority to implement it.
Progressives say they have a solution: They want President Joe Biden to roll out similar prohibitions through federal agencies, such as the Transportation Department, so that noncompetes are banned across the economy.
Eleven think tanks and advocacy groups sent a letter to the White House on Tuesday urging the president to take this approach to bolster the FTC effort. They called noncompetes “exploitative, one-sided employment contracts” that should be restricted wherever possible.
“There is no defensible reason why these industries should be exempted from a ban on non-compete agreements,” the groups wrote to Lael Brainard, director of Biden’s National Economic Council. “Employees of financial institutions, airlines, utilities, internet service providers, oil and gas pipelines, railroads, meatpackers, and nonprofit healthcare systems should all have the same protections from these coercive employment contracts.”
The groups, which include the American Economic Liberties Project, the Economic Policy Institute and the Open Markets Institute, said Biden should deploy a “whole-of-government approach” to the noncompete issue.
“There is no defensible reason why these industries should be exempted from a ban on non-compete agreements.”
- Progressive groups in a letter to the White House
Noncompetes lock workers into their jobs by forbidding them from taking similar positions at other employers for a certain amount of time after they quit or get fired. The agreements have come under fire from politicians and regulators because of the way they limit mobility in the labor market and put a lid on pay.
The independent FTC introduced its proposed rule in January but has not finalized it. The agency projects the rule would raise wages by as much as $296 billion per year by forcing employers to compete more for workers.
But the commission, which is led by FTC Chair Lina Khan, a progressive Biden appointee, noted in its proposed rule that under antitrust law it does not have jurisdiction in every sector.
Therefore, “certain banks, savings and loan institutions, federal credit unions, common carriers, air carriers and foreign air carriers” might be exempted from the final rule when it’s issued.
The rule also said it may not apply to organizations that are not “organized to carry on business for its own profit or that of its members” — i.e., nonprofit employers.
In their letter, the groups said they are particularly concerned with the possibility of large nonprofit health care systems being excluded from the rule. Noncompetes are commonly used in the health care field, with physicians, nurses and other workers being barred from accepting positions at competing hospitals or groups. They referred to a journal article that estimated up to 80% of certified registered nurse anesthetists were subject to noncompetes.
To avoid a broad carve-out in the health care industry, the groups recommended the Department of Health and Human Services create a rule forbidding noncompetes at any organization that accepts Medicare reimbursement.
They also said the Transportation Department should promulgate a rule barring air carriers from implementing “training repayment agreement provisions,” which force workers to repay money for training when they leave a job. HuffPost previously reported on a pilot who was forced to pay her airline $20,000 when she quit. In its proposed rule, the FTC says it considers such contracts a form of noncompete agreement that violates antitrust law.
The FTC recently allowed the public to comment on its proposal to ban noncompetes, a formal step before a federal agency finalizes a rule. Nearly 27,000 comments were submitted, the vast majority of which appeared supportive of the agency’s efforts.
As one commenter put it, “It is high time that these onorous [sic], ridiculous and ANTICOMPETITIVE non-compete clauses be done away with. They only serve the interests of monopolies, while harming workers, consumers and communities.”