DOL DAILY BRIEFING
U.S. Department of Labor
By TechMIS
TO: | U.S. Department of Labor & Staff |
DATE: | Thursday, April 25, 2024 6:00 AM ET |
Editorial Note: select full-text content is highlighted in “gray” in the above table of contents.
Secretary Mentions
(4/24/2024 12:06 PM, Lauren Kaori Gurley)
Millions of American workers will soon be eligible for overtime pay thanks to a final rule announced by the U.S. Labor Department this week.
The development represents the biggest increase in the federal overtime threshold in decades. Beginning July 1, salaried workers earning less than $43,888 a year will qualify for 1.5 times pay if they work more than 40 hours a week. That’s up from the current ceiling of $35,568 a year.
The threshold will expand again to salaried workers making less than $58,656 on Jan. 1, 2025.
Acting Labor Secretary Julie Su said, in a statement on Tuesday, that the “rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time.”
Who will benefit?
The rule will boost wages for many workers in low-wage but salaried occupations — including in hospitality, health care, finance, manufacturing and retail — making them eligible for time-and-a-half pay after working more than 40 hours in a week.
Most hourly workers are already entitled to overtime pay, but non-hourly workers in executive, administrative and professional roles — including some supervisors — are exempt unless they earn less than the threshold set by the Labor Department.
For example, a salaried restaurant supervisor or office worker who makes more than $35,568 but less than $58,656 could now be eligible for overtime pay. The proposed change stands to boost the pocketbooks of millions of the country’s most vulnerable workers, including women, people of color and workers without college degrees.
An Economic Policy Institute analysis of the rule found that 4.3 million more workers will be eligible for overtime pay because of the rule. That includes 2.4 million more women and 1 million more people of color.
Salary thresholds for overtime eligibility will be updated every three years, the Labor Department said, based off wage data.
Who opposes the rule?
Business associations and conservative lawmakers have rushed to protest the rule, saying it could exacerbate inflation, by raising prices and even result in job losses. The National Retail Federation, the National Restaurant Association, and the International Franchise Association are among the rule’s critics.
David French, executive vice president of government relations at the National Retail Federation, said the rule could result in workers losing managerial positions, the ability to work from home and “cause employers to reexamine compensation packages for millions of workers nationwide.”
“This rule is the latest unnecessary and burdensome regulation from the Biden administration targeting small businesses,” said Michael Layman, senior vice president of government relations and public affairs at the International Franchise Association in a statement.
Will the rule receive legal challenges?
Business and trade organizations are expected to challenge the development in court, as they previously did when the Obama administration moved to more than double the threshold. After business groups and states sued over the rule in 2016, a federal judge issued an injunction blocking it. The Trump administration later abandoned the rule, bringing the threshold down to $35,568 a year, its current level.
Millions of American workers will soon be eligible for overtime pay thanks to a final rule announced by the U.S. Labor Department this week.
The development represents the biggest increase in the federal overtime threshold in decades. Beginning July 1, salaried workers earning less than $43,888 a year will qualify for 1.5 times pay if they work more than 40 hours a week. That’s up from the current ceiling of $35,568 a year.
The threshold will expand again to salaried workers making less than $58,656 on Jan. 1, 2025.
Acting Labor Secretary Julie Su said, in a statement on Tuesday, that the “rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time.”
Who will benefit?
The rule will boost wages for many workers in low-wage but salaried occupations — including in hospitality, health care, finance, manufacturing and retail — making them eligible for time-and-a-half pay after working more than 40 hours in a week.
Most hourly workers are already entitled to overtime pay, but non-hourly workers in executive, administrative and professional roles — including some supervisors — are exempt unless they earn less than the threshold set by the Labor Department.
For example, a salaried restaurant supervisor or office worker who makes more than $35,568 but less than $58,656 could now be eligible for overtime pay. The proposed change stands to boost the pocketbooks of millions of the country’s most vulnerable workers, including women, people of color and workers without college degrees.
An Economic Policy Institute analysis of the rule found that 4.3 million more workers will be eligible for overtime pay because of the rule. That includes 2.4 million more women and 1 million more people of color.
Salary thresholds for overtime eligibility will be updated every three years, the Labor Department said, based off wage data.
Who opposes the rule?
Business associations and conservative lawmakers have rushed to protest the rule, saying it could exacerbate inflation, by raising prices and even result in job losses. The National Retail Federation, the National Restaurant Association, and the International Franchise Association are among the rule’s critics.
David French, executive vice president of government relations at the National Retail Federation, said the rule could result in workers losing managerial positions, the ability to work from home and “cause employers to reexamine compensation packages for millions of workers nationwide.”
“This rule is the latest unnecessary and burdensome regulation from the Biden administration targeting small businesses,” said Michael Layman, senior vice president of government relations and public affairs at the International Franchise Association in a statement.
Will the rule receive legal challenges?
Business and trade organizations are expected to challenge the development in court, as they previously did when the Obama administration moved to more than double the threshold. After business groups and states sued over the rule in 2016, a federal judge issued an injunction blocking it. The Trump administration later abandoned the rule, bringing the threshold down to $35,568 a year, its current level.
(4/24/2024 1:53 PM, Rebecca Rainey and Ben Miller)
Two signature US Labor Department policies are almost certain to face a test of whether the latest updates to the agency’s regulations can survive legal deficiencies that led to the demise of their Obama-era predecessors.
The Biden administration released final rules Tuesday both to extend overtime pay protections to cover millions more US workers and to expand strict fiduciary standards of conduct to cover more retirement plan advisers. Both immediately drew pushback from business groups and Wall Street.
“Based on this deeply flawed process, I am going to recommend to the Finseca board that litigation makes sense,” said Marc Cadin, CEO of the financial security professionals group. “I don’t think we can just sit by and let them foist this on the American people.”
While the rules implement different federal statutes—the Fair Labor Standards Act and the Employee Retirement Income Security Act of 1974—both have the potential to induce some legal deja-vu if the DOL must defend the new policies in court.
The Obama administration’s overtime and fiduciary rules were struck down for going beyond the text of the underlying laws. Management-side attorneys say the new rules suffer the same flaws.
The Biden administration has the same flawed gameplan that the court struck down in 2016, James Paretti, a management-side attorney at Littler Mendelson PC, said of the overtime rule. “It could be a case of history repeating itself.”
Carol McClarnon, a partner in Eversheds Sutherland (US) LLP’s employee benefits and executive compensation department, said the new fiduciary rule has “provisions that I still think are problematic and subject to litigation.”
“I think it’s going to get attacked all over the place,” she said.
Three-Part Test
Under the Fair Labor Standards Act, there are several exemptions to overtime pay requirements for certain industries.
When it comes to “executive, administrative, professional and outside sales” employees, the DOL uses a three-part test that requires an employee to be salaried, make more than a certain amount per year, and have certain job duties in order to be exempt from time-and-a-half-pay-requirements.
In 2016, the Obama administration attempted to raise the salary threshold piece of that test to $47,476 and update it every three years. But the rule—which never went into effect—was halted and later invalidated by a federal judge in Texas, who said the DOL set the salary threshold so high it “effectively eliminated” the duties portion of the test.
Judge Amos Mazzant of the US District Court for the Eastern District of Texas also found that the provision to automatically update the threshold went beyond the agency’s authority.
Management-side attorneys predict the new overtime rule—which would similarly raise the salary threshold to roughly $59,000 and update it triannually—will likely meet the same fate.
“I do think that the rule at least theoretically has the same sorts of vulnerabilities as the 2016 rule,” said Timothy Taylor, an employment and litigation attorney at Holland & Knight LLP who served as a deputy solicitor of labor during the Trump administration. He pointed to the rule’s significant initial increases in the salary threshold and the automatic updates.
Different Percentiles
But there is a big difference between the 2016 and the 2024 rules: the methodology used to calculate the salary threshold.
The existing overtime salary threshold calculation—set under former President George W. Bush and also used by the Trump administration—is based on the 20th percentile of weekly earnings of full-time salaried workers in the lowest wage region of the country, but it’s not automatically updated.
The Obama-era test would have tied its salary threshold automatic updates to what the bottom 40% of these workers were earning, which would have made far more employees eligible for overtime pay.
Similarly, the Biden rule sets its triannual updates based on the 35th percentile of earnings in the lowest wage region in the US, which is currently the South.
“That does directly implicate the 2016 challenge to the Obama rule,” said Andrew Spital, co-chair of Willkie Farr & Gallagher LLP’s employment litigation and counseling practice.
“If 20% to 40% is an overreach, well, then isn’t 20% to 35% also an overreach?” he said. “That’s going to be the argument.”
Separately, some attorneys have suggested that the DOL’s use of Trump-era methodology to calculate an intermediate salary threshold of $43,888, scheduled for July 1, may help that provision survive a legal challenge.
The agency explained in its final rule that its approach “will work effectively with the standard duties test to better define and delimit” the executive, administrative, and professional exemption and will ensure “overtime protection for some lower-salaried employees without excluding from exemption too many white-collar employees solely based on their salary level.”
In response to comments that the new rule runs afoul of the 2017 decision striking down the Obama regulation, the DOL said its policy won’t “create an impermissible ‘de facto’ salary-only test or make nonexempt too many employees who pass the duties test, and is compatible with the district court decision’s emphasis on the salary level test’s historic screening function.”
“Time will tell whether what they what they’ve done is sufficient to allay those sort of concerns,” Taylor said.
Fiduciary Definition
The DOL similarly attempted in its new fiduciary rule to overcome the defects that sank the Obama-era version.
“The preamble really reflects the ways in which this rule was crafted so as to not fall into the same traps, so it’s not just a rehash of that 2016 rule, it’s really intended to be a different and more resilient rule,” said Elizabeth Dyer, partner at Cleary Gottlieb. “The DOL is acutely aware of this, that the rule is likely to be challenged whether it’s by the insurance industry or some other contingent just because of the changes it’s going to usher in.”
The US Court of Appeals for the Fifth Circuit vacated the Obama regulation in 2018, ruling 2-1 against the DOL’s attempt to replace a 1975 five-part test defining an investment advice fiduciary.
The Obama rule was inconsistent with the plain text of ERISA and the Internal Revenue Code as well as the common law meaning of “fiduciary,” which is a “special relationship of trust and confidence” with a client, the court found.
Imposing fiduciary duties on IRA investments, annuities, and other insurance products thus unlawfully expanded the DOL’s purview under ERISA, the court said.
Removing the five-part test to determine who qualifies as a fiduciary—in particular an element focused on whether advice is provided on a “regular basis"—is one key way the new rule revamps past iterations and brings advisers who only provide a single instance of advice under the umbrella of its new definition.
The DOL said this specific change was meant to alleviate tension with the statutory text of ERISA, which the Fifth Circuit highlighted.
Stricter Exemption Conditions
But McClarnon said the DOL’s amendment to its PTE 2020-02 procedures and requirements and other prohibited transaction exemptions—which allow fiduciaries to receive compensation that would otherwise be banned—may be ripe for renewed litigation.
“Slapping a disclosure on a communication or saying it was a one-time interaction won’t be sufficient to allow you to avoid fiduciary responsibility” under the new rule, said Robert Sichel, partner at K&L Gates LLP. “The heart of this is that the DOL is turning more folks into fiduciaries, that’s their goal, so at the end of the day there’s going to be more fiduciaries and more fiduciary interactions and that will lead to more litigation.”
Stephen Hall, legal director and securities specialist at Better Markets—an industry group that supports the new fiduciary rule—noted there’s recently been “a real explosion in litigation challenging agency rules,” making challenges to the new DOL policies “inevitable.”
“Judges on the federal bench, especially in areas like the Fifth Circuit, are predisposed to accept industry attacks,” he said.
Two signature US Labor Department policies are almost certain to face a test of whether the latest updates to the agency’s regulations can survive legal deficiencies that led to the demise of their Obama-era predecessors.
The Biden administration released final rules Tuesday both to extend overtime pay protections to cover millions more US workers and to expand strict fiduciary standards of conduct to cover more retirement plan advisers. Both immediately drew pushback from business groups and Wall Street.
“Based on this deeply flawed process, I am going to recommend to the Finseca board that litigation makes sense,” said Marc Cadin, CEO of the financial security professionals group. “I don’t think we can just sit by and let them foist this on the American people.”
While the rules implement different federal statutes—the Fair Labor Standards Act and the Employee Retirement Income Security Act of 1974—both have the potential to induce some legal deja-vu if the DOL must defend the new policies in court.
The Obama administration’s overtime and fiduciary rules were struck down for going beyond the text of the underlying laws. Management-side attorneys say the new rules suffer the same flaws.
The Biden administration has the same flawed gameplan that the court struck down in 2016, James Paretti, a management-side attorney at Littler Mendelson PC, said of the overtime rule. “It could be a case of history repeating itself.”
Carol McClarnon, a partner in Eversheds Sutherland (US) LLP’s employee benefits and executive compensation department, said the new fiduciary rule has “provisions that I still think are problematic and subject to litigation.”
“I think it’s going to get attacked all over the place,” she said.
Three-Part Test
Under the Fair Labor Standards Act, there are several exemptions to overtime pay requirements for certain industries.
When it comes to “executive, administrative, professional and outside sales” employees, the DOL uses a three-part test that requires an employee to be salaried, make more than a certain amount per year, and have certain job duties in order to be exempt from time-and-a-half-pay-requirements.
In 2016, the Obama administration attempted to raise the salary threshold piece of that test to $47,476 and update it every three years. But the rule—which never went into effect—was halted and later invalidated by a federal judge in Texas, who said the DOL set the salary threshold so high it “effectively eliminated” the duties portion of the test.
Judge Amos Mazzant of the US District Court for the Eastern District of Texas also found that the provision to automatically update the threshold went beyond the agency’s authority.
Management-side attorneys predict the new overtime rule—which would similarly raise the salary threshold to roughly $59,000 and update it triannually—will likely meet the same fate.
“I do think that the rule at least theoretically has the same sorts of vulnerabilities as the 2016 rule,” said Timothy Taylor, an employment and litigation attorney at Holland & Knight LLP who served as a deputy solicitor of labor during the Trump administration. He pointed to the rule’s significant initial increases in the salary threshold and the automatic updates.
Different Percentiles
But there is a big difference between the 2016 and the 2024 rules: the methodology used to calculate the salary threshold.
The existing overtime salary threshold calculation—set under former President George W. Bush and also used by the Trump administration—is based on the 20th percentile of weekly earnings of full-time salaried workers in the lowest wage region of the country, but it’s not automatically updated.
The Obama-era test would have tied its salary threshold automatic updates to what the bottom 40% of these workers were earning, which would have made far more employees eligible for overtime pay.
Similarly, the Biden rule sets its triannual updates based on the 35th percentile of earnings in the lowest wage region in the US, which is currently the South.
“That does directly implicate the 2016 challenge to the Obama rule,” said Andrew Spital, co-chair of Willkie Farr & Gallagher LLP’s employment litigation and counseling practice.
“If 20% to 40% is an overreach, well, then isn’t 20% to 35% also an overreach?” he said. “That’s going to be the argument.”
Separately, some attorneys have suggested that the DOL’s use of Trump-era methodology to calculate an intermediate salary threshold of $43,888, scheduled for July 1, may help that provision survive a legal challenge.
The agency explained in its final rule that its approach “will work effectively with the standard duties test to better define and delimit” the executive, administrative, and professional exemption and will ensure “overtime protection for some lower-salaried employees without excluding from exemption too many white-collar employees solely based on their salary level.”
In response to comments that the new rule runs afoul of the 2017 decision striking down the Obama regulation, the DOL said its policy won’t “create an impermissible ‘de facto’ salary-only test or make nonexempt too many employees who pass the duties test, and is compatible with the district court decision’s emphasis on the salary level test’s historic screening function.”
“Time will tell whether what they what they’ve done is sufficient to allay those sort of concerns,” Taylor said.
Fiduciary Definition
The DOL similarly attempted in its new fiduciary rule to overcome the defects that sank the Obama-era version.
“The preamble really reflects the ways in which this rule was crafted so as to not fall into the same traps, so it’s not just a rehash of that 2016 rule, it’s really intended to be a different and more resilient rule,” said Elizabeth Dyer, partner at Cleary Gottlieb. “The DOL is acutely aware of this, that the rule is likely to be challenged whether it’s by the insurance industry or some other contingent just because of the changes it’s going to usher in.”
The US Court of Appeals for the Fifth Circuit vacated the Obama regulation in 2018, ruling 2-1 against the DOL’s attempt to replace a 1975 five-part test defining an investment advice fiduciary.
The Obama rule was inconsistent with the plain text of ERISA and the Internal Revenue Code as well as the common law meaning of “fiduciary,” which is a “special relationship of trust and confidence” with a client, the court found.
Imposing fiduciary duties on IRA investments, annuities, and other insurance products thus unlawfully expanded the DOL’s purview under ERISA, the court said.
Removing the five-part test to determine who qualifies as a fiduciary—in particular an element focused on whether advice is provided on a “regular basis"—is one key way the new rule revamps past iterations and brings advisers who only provide a single instance of advice under the umbrella of its new definition.
The DOL said this specific change was meant to alleviate tension with the statutory text of ERISA, which the Fifth Circuit highlighted.
Stricter Exemption Conditions
But McClarnon said the DOL’s amendment to its PTE 2020-02 procedures and requirements and other prohibited transaction exemptions—which allow fiduciaries to receive compensation that would otherwise be banned—may be ripe for renewed litigation.
“Slapping a disclosure on a communication or saying it was a one-time interaction won’t be sufficient to allow you to avoid fiduciary responsibility” under the new rule, said Robert Sichel, partner at K&L Gates LLP. “The heart of this is that the DOL is turning more folks into fiduciaries, that’s their goal, so at the end of the day there’s going to be more fiduciaries and more fiduciary interactions and that will lead to more litigation.”
Stephen Hall, legal director and securities specialist at Better Markets—an industry group that supports the new fiduciary rule—noted there’s recently been “a real explosion in litigation challenging agency rules,” making challenges to the new DOL policies “inevitable.”
“Judges on the federal bench, especially in areas like the Fifth Circuit, are predisposed to accept industry attacks,” he said.
(4/24/2024 6:38 AM, Wyatte Grantham-Philips)
(4/24/2024 6:00 AM, Aimee Picchi)
(4/24/2024 11:54 AM, Jennifer Liu)
(4/24/2024 9:15 AM, Doug Cunningham)
(4/24/2024 11:53 AM, Zach Mentz)
(4/24/2024 2:59 PM, EmilyAnn Jackman)
(4/24/2024 2:43 PM, Justin Boggs)
(4/24/2024 11:00 AM, Sophie Boudreau)
(4/24/2024 8:30 AM, Joe Hiti)
(4/24/2024 12:50 PM, Debbie Lord)
(4/24/2024 10:30 AM, Bill Galluccio)
(4/24/2024 7:09 AM, Staff)
(4/24/2024 2:42 PM, Megan Henney)
DOL News Releases / News and Opinion
(4/24/2024 12:05 PM, WHD)
(4/24/2024 12:05 PM, OSEC)
(4/24/2024 12:05 PM, WHD)
Employment
(4/24/2024 2:45 PM, Kristina Russo)
Unemployment
(4/24/2024 4:10 PM, Leslie Patton)
Whirlpool Corp., the owner of the Maytag and Amana appliance brands, is cutting about 1,000 salaried positions worldwide to reduce costs as slow US home sales limit demand.
The company has completed its first wave of layoffs of office staff and is planning to start another soon, Chief Financial Officer Jim Peters said in an interview. Earlier this year, the company said it was cutting jobs without saying how many. Whirlpool employed 59,000 workers worldwide as of the end of 2023.
“The discretionary side that’s driven by existing home sales really has seen no pick up and no benefit yet,” Peters said, referring to weak US demand. “We’re simplifying our structure,” he added.
The Benton Harbor, Michigan-based company is trying to reduce expenses by about $400 million this year, but that’s proving tougher than expected due to higher costs for labor, transportation and logistics. “We’ve seen inflation remain sticky,” Peters said.
Sales of large appliances in North America fell 8.1% in the first quarter from a year earlier, Whirlpool announced Wednesday. Revenue was $4.49 billion in the period, a decline of 3.4% and below analysts’ average estimate.
Low existing home sales in the US have eroded demand for new refrigerators and washers. But Whirlpool is seeing signs that Americans may be shifting to remodeling their homes in lieu buying new ones.
“We are starting to see some positive signs” on remodeling, Peters said, adding that some property owners are using their home equity to fund renovations.
Whirlpool has cut back on discounts and promotions while turning to smaller, counter-top appliances such as KitchenAid stand mixers and battery-powered blenders to offset weak demand for large appliances. It’s also entering a new category by introducing fully automatic espresso makers. The company says these smaller items are more profitable.
Whirlpool Corp., the owner of the Maytag and Amana appliance brands, is cutting about 1,000 salaried positions worldwide to reduce costs as slow US home sales limit demand.
The company has completed its first wave of layoffs of office staff and is planning to start another soon, Chief Financial Officer Jim Peters said in an interview. Earlier this year, the company said it was cutting jobs without saying how many. Whirlpool employed 59,000 workers worldwide as of the end of 2023.
“The discretionary side that’s driven by existing home sales really has seen no pick up and no benefit yet,” Peters said, referring to weak US demand. “We’re simplifying our structure,” he added.
The Benton Harbor, Michigan-based company is trying to reduce expenses by about $400 million this year, but that’s proving tougher than expected due to higher costs for labor, transportation and logistics. “We’ve seen inflation remain sticky,” Peters said.
Sales of large appliances in North America fell 8.1% in the first quarter from a year earlier, Whirlpool announced Wednesday. Revenue was $4.49 billion in the period, a decline of 3.4% and below analysts’ average estimate.
Low existing home sales in the US have eroded demand for new refrigerators and washers. But Whirlpool is seeing signs that Americans may be shifting to remodeling their homes in lieu buying new ones.
“We are starting to see some positive signs” on remodeling, Peters said, adding that some property owners are using their home equity to fund renovations.
Whirlpool has cut back on discounts and promotions while turning to smaller, counter-top appliances such as KitchenAid stand mixers and battery-powered blenders to offset weak demand for large appliances. It’s also entering a new category by introducing fully automatic espresso makers. The company says these smaller items are more profitable.
(4/24/2024 3:41 PM, Breck Dumas)
(4/24/2024 1:05 PM, Mari Galaviz)
(4/24/2024 1:08 PM, Aidan Ryan)
Thirty-one employees at WBUR, roughly 14 percent of the station’s staff, are leaving the company through layoffs and buyouts, according to a message that chief executive Margaret Low wrote to staff on Wednesday.
Twenty-four of those employees took a voluntary buyout that was offered last month, including four senior managers. Seven staff members, including three part-time employees, were laid off Wednesday.
The station, which has been grappling with a financial shortfall for months, is also eliminating nine open jobs, pulling back on travel expenses, and will spend less or negotiate lower rates for contract services, Low said. The station will adjust the schedule of some programming, but no shows will be eliminated.
Low added that the changes would save the station $4 million. And she added that the coming fiscal year “will be another year of deficit spending as we map a path to sustainability. Which we are doing.”
The station’s editorial union, which is part of SAG-AFTRA, said Wednesday “has been a difficult day for everyone at WBUR.”
“Our thoughts are with all of our colleagues who have been told that their job is being eliminated,” the union said in a statement. “Of course, we are disappointed that all of our jobs were not preserved through cost-saving alternatives.”
The statement noted, however, that the buyouts “helped to reduce the number of job losses and will allow laid-off colleagues to apply for open internal positions.”
The layoffs and buyouts will affect departments across the station, a spokesperson said. The four senior managers that took buyouts are executive director of business partnerships Pete Matthews, senior director of finance Del Reese, director of membership and campaign strategy Mike Steffon, and executive director of engineering, operations and IT Karl Voelker.
The decision to lay off staff comes two months after WBUR chief executive Margaret Low first informed staff that the station was facing financial challenges. In a letter last month, Low told donors that on-air sponsorship at WBUR fell by 40 percent over the past five years. WBUR last laid off staff in a 2020 round of cuts that eliminated about 10 percent of its work force.
In late March, WBUR offered employee buyouts in an effort to cut 10 percent of its budget but warned staff that the station still expected to lay off some employees.
The union said on Wednesday that it had offered alternatives to job cuts, including pay cuts and furloughs, but that WBUR management decided to proceed with layoffs.
“We again offered to discuss alternatives, like furloughs and foregoing raises, but were told on Monday that those alternatives would not change their decision to lay off staff,” the union said in its statement.
The challenges at WBUR, whose broadcast license is owned by Boston University, are not unique to the station. Public radio stations across the country have reported financial challenges and cut staff due to a decline in advertising and rising costs.
WBUR is also not alone in Boston. GBH — a public media organization that encompasses 89.7 GBH, a television station, PBS programming, and more — warned employees of potential layoffs last month as it faces a budget deficit. Its revenue has remained stable in recent years, but costs have increased.
The challenges at both stations have prompted questions about whether Boston can continue to support two NPR news stations that focus on news, which is uncommon even in many of the country’s large cities.
Thirty-one employees at WBUR, roughly 14 percent of the station’s staff, are leaving the company through layoffs and buyouts, according to a message that chief executive Margaret Low wrote to staff on Wednesday.
Twenty-four of those employees took a voluntary buyout that was offered last month, including four senior managers. Seven staff members, including three part-time employees, were laid off Wednesday.
The station, which has been grappling with a financial shortfall for months, is also eliminating nine open jobs, pulling back on travel expenses, and will spend less or negotiate lower rates for contract services, Low said. The station will adjust the schedule of some programming, but no shows will be eliminated.
Low added that the changes would save the station $4 million. And she added that the coming fiscal year “will be another year of deficit spending as we map a path to sustainability. Which we are doing.”
The station’s editorial union, which is part of SAG-AFTRA, said Wednesday “has been a difficult day for everyone at WBUR.”
“Our thoughts are with all of our colleagues who have been told that their job is being eliminated,” the union said in a statement. “Of course, we are disappointed that all of our jobs were not preserved through cost-saving alternatives.”
The statement noted, however, that the buyouts “helped to reduce the number of job losses and will allow laid-off colleagues to apply for open internal positions.”
The layoffs and buyouts will affect departments across the station, a spokesperson said. The four senior managers that took buyouts are executive director of business partnerships Pete Matthews, senior director of finance Del Reese, director of membership and campaign strategy Mike Steffon, and executive director of engineering, operations and IT Karl Voelker.
The decision to lay off staff comes two months after WBUR chief executive Margaret Low first informed staff that the station was facing financial challenges. In a letter last month, Low told donors that on-air sponsorship at WBUR fell by 40 percent over the past five years. WBUR last laid off staff in a 2020 round of cuts that eliminated about 10 percent of its work force.
In late March, WBUR offered employee buyouts in an effort to cut 10 percent of its budget but warned staff that the station still expected to lay off some employees.
The union said on Wednesday that it had offered alternatives to job cuts, including pay cuts and furloughs, but that WBUR management decided to proceed with layoffs.
“We again offered to discuss alternatives, like furloughs and foregoing raises, but were told on Monday that those alternatives would not change their decision to lay off staff,” the union said in its statement.
The challenges at WBUR, whose broadcast license is owned by Boston University, are not unique to the station. Public radio stations across the country have reported financial challenges and cut staff due to a decline in advertising and rising costs.
WBUR is also not alone in Boston. GBH — a public media organization that encompasses 89.7 GBH, a television station, PBS programming, and more — warned employees of potential layoffs last month as it faces a budget deficit. Its revenue has remained stable in recent years, but costs have increased.
The challenges at both stations have prompted questions about whether Boston can continue to support two NPR news stations that focus on news, which is uncommon even in many of the country’s large cities.
(4/24/2024 5:21 PM, Talia Soglin)
(4/24/2024 11:49 PM, John Kennedy O’Connor)
(4/24/2024 6:51 PM, Laura J. Nelson)
(4/24/2024 3:37 PM, Lindsey Holden)
Apprenticeship
(4/24/2024 6:39 PM, Staff)
(4/24/2024 1:12 PM, Staff)
Labor
(4/24/2024 6:13 PM, Cathey Bussewitz and Mae Anderson)
(4/24/2024 6:33 PM, Evan Donovan)
(4/24/2024 7:00 AM, Jordan Rau)
(4/24/2024 3:52 PM, Lauren Irwin)
(4/24/2024 8:45 AM, Staff)
(4/24/2024 12:50 PM, Staff)
(4/24/2024 1:15 PM, Staff)
Child Labor
(4/24/2024 6:58 AM, Gautam Naik)
Child labor is a sensitive and hard-to-measure risk that typically stays hidden in the far reaches of corporate supply chains—and climate change is only making it worse.
Now, a newly developed quantitative approach may help raise its prominence as an environmental, social and governance issue. The AI-driven tool, known as the Child Labor Index, scores companies in three areas: disclosure levels, public perception and the commodity-level exposure of the supply chain to child labor. Fund managers can use the scores to pinpoint high-risk companies and identify others that need to confront the issue.
Among investors, “the level of awareness of child labor is incredibly low,” said Eleanor Harry, chief executive and founder of HACE, the UK-based startup that developed the index. “This will help them monitor risk in their portfolio.”
At least 160 million children, or one in 10, are part of the global workforce—and climate change is a “threat multiplier,” according to recent research published by the International Labour Organization. The United Nations agency found that “a growing number of studies consistently support the view that poverty induces households to rely more on child labor.”
That’s especially true in agriculture, where 70% of all child labor is found. As environmental disasters push more people into poverty, families are forced to pull children from school and put them to work in farm and field.
Villages in Cambodia and Tanzania that were hit by drought, flood and crop failure had much higher levels of child labor, according to the ILO. In Uganda and Pakistan, higher food prices made child labor more likely among non-agricultural families. A similar dynamic is unfolding in Peru, Ethiopia, Nepal and Ivory Coast, the Food and Agriculture Organization reported.
While richer countries have tougher production standards, they aren’t immune to the risk. Last year, a US child-labor scandal triggered a crisis for a meatpacking company owned by private equity firm Blackstone Inc. In October, the US Department of Labor confirmed a child-labor probe of American food giants Tyson Foods Inc. and Perdue Farms Inc. A recent analysis done by a firm owned by Goldman Sachs Group Inc. showed the US has slipped in its supply-chain ranking as a result of child-labor violations.
Regulators are now pushing companies and investors to do more. Under the European Union’s Corporate Sustainability Due Diligence Directive, companies face legal liability if they fail to address environmental and human-rights violations, including child labor, in their supply chains.
In March, the EU also agreed to adopt a regulation to prohibit products made using forced labor from being sold in, or exported from, the EU market. In Canada, a new act took effect in January seeking to end forced and child labor in corporate supply chains.
The Child Labor Index aims to help asset managers, pension funds and other investors monitor 55,000 publicly traded companies to see which ones are aligned and which ones may be falling short of the new rules.
Alerting investors to their exposure to the risk can throw up surprises, Harry said. For example, an asset manager may be unaware of the true extent of child-labor risk for certain climate-transition commodities, such as tin used in solar panels, lithium for batteries or even sugarcane used for some forms of renewable energy.
“They may not know about the child labor associated with zinc, silver, gold or blueberries,” Harry said. “But they can click through to each commodity and see what the risk looks like.”
Rather than manually going through data sources, HACE’s artificial-intelligence technology scans thousands of news sources, corporate disclosures and other information to assign a score between 1 and 100 for a company’s disclosure level, public perception of its child labor risk and the possible exposure in its supply chain. The use of AI helps eliminate human bias that may affect the scores.
“We’re creating data points and engagement guidance that investors can use” to then push companies to tackle child labor, said Harry, who founded HACE in 2020.
HACE’s AI platform is now being tested by a few asset managers and the expectation is that it will be commercially available later this year.
Sustainable finance in brief
The value of private credit deals in the oil and gas industry has grown exponentially, rising to $9 billion in the 24 months through the end of 2023, up from $450 million arranged in the preceding two years. That’s as many banks retreat from the sector in response to regulatory and investor demands. Now, global ESG investors with $9.5 trillion under management say it’s time to demand more accountability from private markets. The Net Zero Asset Owner Alliance, whose 89 members include CalPERS, Zurich Insurance and Munich Re, is expanding its protocol to include all private asset classes, meaning investors agree to a series of measures that add pressure on private markets to cut portfolio emissions. Under the new protocol, alliance members are required to target cuts of 40% to 60% in emissions by 2030 compared with 2019 levels, with no use of carbon credits till the next decade. Current requirements, which cover the five-year period to 2025, mandated cuts of 22% to 32%.
Child labor is a sensitive and hard-to-measure risk that typically stays hidden in the far reaches of corporate supply chains—and climate change is only making it worse.
Now, a newly developed quantitative approach may help raise its prominence as an environmental, social and governance issue. The AI-driven tool, known as the Child Labor Index, scores companies in three areas: disclosure levels, public perception and the commodity-level exposure of the supply chain to child labor. Fund managers can use the scores to pinpoint high-risk companies and identify others that need to confront the issue.
Among investors, “the level of awareness of child labor is incredibly low,” said Eleanor Harry, chief executive and founder of HACE, the UK-based startup that developed the index. “This will help them monitor risk in their portfolio.”
At least 160 million children, or one in 10, are part of the global workforce—and climate change is a “threat multiplier,” according to recent research published by the International Labour Organization. The United Nations agency found that “a growing number of studies consistently support the view that poverty induces households to rely more on child labor.”
That’s especially true in agriculture, where 70% of all child labor is found. As environmental disasters push more people into poverty, families are forced to pull children from school and put them to work in farm and field.
Villages in Cambodia and Tanzania that were hit by drought, flood and crop failure had much higher levels of child labor, according to the ILO. In Uganda and Pakistan, higher food prices made child labor more likely among non-agricultural families. A similar dynamic is unfolding in Peru, Ethiopia, Nepal and Ivory Coast, the Food and Agriculture Organization reported.
While richer countries have tougher production standards, they aren’t immune to the risk. Last year, a US child-labor scandal triggered a crisis for a meatpacking company owned by private equity firm Blackstone Inc. In October, the US Department of Labor confirmed a child-labor probe of American food giants Tyson Foods Inc. and Perdue Farms Inc. A recent analysis done by a firm owned by Goldman Sachs Group Inc. showed the US has slipped in its supply-chain ranking as a result of child-labor violations.
Regulators are now pushing companies and investors to do more. Under the European Union’s Corporate Sustainability Due Diligence Directive, companies face legal liability if they fail to address environmental and human-rights violations, including child labor, in their supply chains.
In March, the EU also agreed to adopt a regulation to prohibit products made using forced labor from being sold in, or exported from, the EU market. In Canada, a new act took effect in January seeking to end forced and child labor in corporate supply chains.
The Child Labor Index aims to help asset managers, pension funds and other investors monitor 55,000 publicly traded companies to see which ones are aligned and which ones may be falling short of the new rules.
Alerting investors to their exposure to the risk can throw up surprises, Harry said. For example, an asset manager may be unaware of the true extent of child-labor risk for certain climate-transition commodities, such as tin used in solar panels, lithium for batteries or even sugarcane used for some forms of renewable energy.
“They may not know about the child labor associated with zinc, silver, gold or blueberries,” Harry said. “But they can click through to each commodity and see what the risk looks like.”
Rather than manually going through data sources, HACE’s artificial-intelligence technology scans thousands of news sources, corporate disclosures and other information to assign a score between 1 and 100 for a company’s disclosure level, public perception of its child labor risk and the possible exposure in its supply chain. The use of AI helps eliminate human bias that may affect the scores.
“We’re creating data points and engagement guidance that investors can use” to then push companies to tackle child labor, said Harry, who founded HACE in 2020.
HACE’s AI platform is now being tested by a few asset managers and the expectation is that it will be commercially available later this year.
Sustainable finance in brief
The value of private credit deals in the oil and gas industry has grown exponentially, rising to $9 billion in the 24 months through the end of 2023, up from $450 million arranged in the preceding two years. That’s as many banks retreat from the sector in response to regulatory and investor demands. Now, global ESG investors with $9.5 trillion under management say it’s time to demand more accountability from private markets. The Net Zero Asset Owner Alliance, whose 89 members include CalPERS, Zurich Insurance and Munich Re, is expanding its protocol to include all private asset classes, meaning investors agree to a series of measures that add pressure on private markets to cut portfolio emissions. Under the new protocol, alliance members are required to target cuts of 40% to 60% in emissions by 2030 compared with 2019 levels, with no use of carbon credits till the next decade. Current requirements, which cover the five-year period to 2025, mandated cuts of 22% to 32%.
(4/24/2024 2:12 PM, Staff)
(4/24/2024 4:10 PM, Staff)
Immigration
(4/24/2024 12:43 PM, Eugene Kim)
(4/24/2024 10:03 AM, Tim Vandenack)
(4/24/2024 12:31 PM, Natalie Wallington)
Working Women
(4/24/2024 10:21 AM, Jessica Dickler and Ana Teresa Solá)
(4/24/2024 6:03 AM, Jacob Zinkula and Juliana Kaplan)
Wages & Compensation
(4/24/2024 7:05 AM, Addy Bink)
(4/24/2024 5:45 PM, Joseph Edelen)
Minimum Wage
(4/24/2024 7:13 AM, Patrick Whittle)
(4/24/2024 6:39 PM, David Guildford and Scout Fischman)
(4/24/2024 5:57 PM, Elle Meyers)
(4/24/2024 5:44 PM, Greg Hilburn)
Overtime
(4/24/2024 10:59 AM, Allen Smith, J.D.)
Millions of salaried workers to become eligible for overtime under new Biden rule (Maryland Matters)
(4/24/2024 6:25 AM, Ariana Figueroa)
(4/24/2024 5:58 PM, Riley Connell)
(4/24/2024 7:14 AM, Staff)
(4/25/2024 12:09 AM, Staff)
Paid Leave
(4/24/2024 6:31 PM, Susan Haigh)
(4/24/2024 3:20 PM, Ken Dixon)
(4/24/2024 9:45 PM, Mark Pazniokas)
(4/24/2024 3:50 PM, Mike Cerulli)
(4/24/2024 6:59 PM, Mike Savino)
(4/24/2024 12:53 PM, Racquel Stephen)
(4/24/2024 7:01 PM, Stanley Dunlap)
(4/24/2024 1:37 PM, Rebecca Griesbach)
(4/24/2024 8:55 PM, Ariel Salk)
Worker’s Compensation
(4/24/2024 11:04 AM, Matt Harvey)
(4/24/2024 7:08 PM, D’Quan Lee)
Employee Misclassification
(4/24/2024 12:03 PM, Erwin Chemerinsky and Christina Chung)
Wage Violations
(4/24/2024 5:12 PM, Heather Pinchbeck)
(4/24/2024 2:01 PM, Tom Marino)
(4/24/2024 11:57 AM, Bill Heltzel)
Worker Safety
(4/24/2024 4:28 PM, Chloe Aiello)
(4/24/2024 8:00 AM, Jon Campisi)
(4/24/2024 1:02 PM, Drew Miller)
(4/24/2024 3:28 PM, Aaron Marrie)
(4/24/2024 2:45 PM, Mary Whitfill Roeloffs)
(4/25/2024 5:10 AM, Hannah Phillips)
(4/24/2024 2:31 PM, Eric Stock)
(4/24/2024 2:05 PM, Staff)
(4/24/2024 6:02 PM, Staff)
(4/24/2024 4:31 PM, Chase Rogers)
(4/24/2024 8:26 PM, Johann Castro and Matt Coutu)
(4/24/2024 1:38 PM, Staff)
Veteran
(4/24/2024 5:10 AM, Boris Ladwig)
(4/24/2024 2:58 PM, Kevin Sheridan)
Union
(4/24/2024 12:40 PM, Staff)
(4/24/2024 2:41 PM, J. Edward Moreno)
Starbucks and the union that represents over 10,000 of its workers returned to the bargaining table on Wednesday for the first time in nearly a year, a pivotal moment in the yearslong battle between the coffee giant and its organized workers.
Company representatives and 150 representatives from the union, Workers United, met at an undisclosed location in Atlanta to begin negotiating a framework for union contracts for each of the over 400 unionized stores.
The last time the two sides sat down was May 23, and they have spent months blaming each other for the impasse. During that time, workers have staged several strikes and tried to win seats on Starbucks’s board, and the company has sued the union over its use of the Starbucks logo.
The feuding eased in February when the two sides issued a joint statement saying they were returning to the bargaining table. Michelle Eisen, a longtime barista at a Starbucks in Buffalo that was the first company-owned store to unionize during the current campaign, said she was optimistic that the company would bargain in good faith.
“It’s been a long couple of years, and it feels like there’s some levity now and a little more lightness in general,” Ms. Eisen said. “All signs point in a positive direction.”
Reflecting the new attitude, over 250 union members plan to attend Wednesday’s session virtually, a way for workers to ensure that all voices are heard. Last year, the union said, Starbucks insisted that the talks be held completely in person.
The union is asking for higher wages and better safety standards, among other issues. Once the two sides agree on an overall framework, individual contracts will be put up to ratification votes by each store. The separate contracts will allow the company and workers to raise issues that may vary by region or type of store, like one that has a drive-through window versus one at a mall.
Starbucks workers began organizing in 2021 with three Buffalo-area stores. Since that campaign began, the National Labor Relations Board has filed numerous complaints accusing Starbucks of taking steps to resist organizing efforts, which the company has denied.
When Starbucks and the union announced that they would return to the bargaining table, the company said it would provide unionized workers with benefits it introduced in 2022 but withheld from union stores, including credit card tipping.
“The union forced management to the bargaining table,” said Eric Blanc, a professor at Rutgers University who studies labor movements. “The scale of the union-busting campaign and its verbosity is unmatched in modern labor history. The fact that the workers were able to overcome that is truly historic.”
Starbucks became willing to resume talks with the union nearly a year after Laxman Narasimhan arrived as chief executive. He took over from the longtime chief executive Howard Schultz, who has said a union was incompatible with Starbucks’s business model.
In March, a coalition of labor unions including Workers United ended its campaign to add its members to the Starbucks board, saying in a statement that it was “time to acknowledge the progress that has been made and to allow the company and its workers to focus on moving forward.”
The union alliance also said it had a “meaningful dialogue” with shareholders who said they believed the company was moving to improve its relationship with its workers.
Starbucks and the union that represents over 10,000 of its workers returned to the bargaining table on Wednesday for the first time in nearly a year, a pivotal moment in the yearslong battle between the coffee giant and its organized workers.
Company representatives and 150 representatives from the union, Workers United, met at an undisclosed location in Atlanta to begin negotiating a framework for union contracts for each of the over 400 unionized stores.
The last time the two sides sat down was May 23, and they have spent months blaming each other for the impasse. During that time, workers have staged several strikes and tried to win seats on Starbucks’s board, and the company has sued the union over its use of the Starbucks logo.
The feuding eased in February when the two sides issued a joint statement saying they were returning to the bargaining table. Michelle Eisen, a longtime barista at a Starbucks in Buffalo that was the first company-owned store to unionize during the current campaign, said she was optimistic that the company would bargain in good faith.
“It’s been a long couple of years, and it feels like there’s some levity now and a little more lightness in general,” Ms. Eisen said. “All signs point in a positive direction.”
Reflecting the new attitude, over 250 union members plan to attend Wednesday’s session virtually, a way for workers to ensure that all voices are heard. Last year, the union said, Starbucks insisted that the talks be held completely in person.
The union is asking for higher wages and better safety standards, among other issues. Once the two sides agree on an overall framework, individual contracts will be put up to ratification votes by each store. The separate contracts will allow the company and workers to raise issues that may vary by region or type of store, like one that has a drive-through window versus one at a mall.
Starbucks workers began organizing in 2021 with three Buffalo-area stores. Since that campaign began, the National Labor Relations Board has filed numerous complaints accusing Starbucks of taking steps to resist organizing efforts, which the company has denied.
When Starbucks and the union announced that they would return to the bargaining table, the company said it would provide unionized workers with benefits it introduced in 2022 but withheld from union stores, including credit card tipping.
“The union forced management to the bargaining table,” said Eric Blanc, a professor at Rutgers University who studies labor movements. “The scale of the union-busting campaign and its verbosity is unmatched in modern labor history. The fact that the workers were able to overcome that is truly historic.”
Starbucks became willing to resume talks with the union nearly a year after Laxman Narasimhan arrived as chief executive. He took over from the longtime chief executive Howard Schultz, who has said a union was incompatible with Starbucks’s business model.
In March, a coalition of labor unions including Workers United ended its campaign to add its members to the Starbucks board, saying in a statement that it was “time to acknowledge the progress that has been made and to allow the company and its workers to focus on moving forward.”
The union alliance also said it had a “meaningful dialogue” with shareholders who said they believed the company was moving to improve its relationship with its workers.
(4/24/2024 12:49 PM, Amelia Lucas)
(4/24/2024 3:00 PM, Peter Coy)
Put yourself in the steel-toed boots of a worker at Volkswagen’s auto assembly plant in Chattanooga, Tenn. Let’s say you vote Republican — not a stretch, since Donald Trump got 60.7 percent of the popular vote in Tennessee in 2020, versus 46.9 percent nationally.
There’s a vote on whether to join the United Automobile Workers union, giving organized labor its first factorywide foothold at a major foreign automaker in the South. Are you a yes or a no?
We know now that the pro-union side won with nearly three-quarters of the vote in an election that ended on Friday. And while there’s no breakdown of the votes by party affiliation, it stands to reason that at least some of the people who voted for the union were Republicans — members of a party that, especially in the South, has been strongly anti-union.
I think what we saw in Chattanooga is workers voting on the basis of economics rather than party alignment. If that continues to happen elsewhere, the South could some day become as unionized as the rest of the country. It won’t happen quickly, though, because government officials and corporate groups are likely to continue to fight back.
Some opponents of the U.A.W.’s organizing clearly attempted to use some workers’ loyalty to Trump as leverage against the union. The website Still No U.A.W. featured a message from Trump on Truth Social that called Shawn Fain, the U.A.W. president, “a Weapon of Mass Destruction on Auto Workers and the Automobile Manufacturing Industry in the United States.” The same website said unions are “major donors to left-wing Democrats” and pointed out that President Biden supported the organizing effort in Chattanooga.
The governors of Alabama, Georgia, Mississippi, South Carolina, Tennessee and Texas, all Republicans, issued a statement just before the vote in Chattanooga warning that U.A.W. leaders “seem more focused on helping President Biden get re-elected than on the autoworker jobs being cut at plants they already represent.”
Yolanda Peoples, a member of the plant’s voluntary organizing committee, who told me she’s a Democrat, said the Republicans’ warnings were “an issue that we did face while we were organizing.” She said, “We were trying to leave politics out of what we had going on inside the plant.”
The outside pressure to vote against the union might have backfired, Peoples said. “My co-workers, whether they were anti- or for, they just got tired of politicians speaking on how we should run our plant. Instead of hurting us during our campaign, it actually helped us.”
I heard the same thing from Billy Dycus, the president of the Tennessee A.F.L.-C.I.O. Labor Council, who describes himself as a political independent. “People said, ‘Wait a minute, we don’t want to hear you tell us what to do anymore,’” he told me, referring to the six governors’ message. “We want to make up our own minds.”
The Detroit Free Press reported in 2020 that according to the U.A.W.’s 2016 postelection survey of its members, about a third of those who voted chose Trump. I think unions are benefiting from the same wave of populism that has helped lift Trump. Workers, including Republicans, appear to have lost confidence that their employers will look out for their best interests. Gallup reported last year that just 18 percent of Republicans have a “great deal” or “quite a lot” of confidence in big business, the lowest level since at least 1973. About twice as many, 35 percent, reported having little or no confidence in big business.
Labor unions, which claim to protect workers from management, seem attractive by comparison. Forty-seven percent of Republicans approved of labor unions last year, up from 26 percent in 2011, according to Gallup. That’s far less than the figures for Democrats (88 percent last year, 78 percent in 2011), but still pretty high.
I see the interest in unions as a rejection of Republican orthodoxy, but not necessarily a sign of budding support for Democrats. It’s worth noting that a majority of the right-to-work laws that allow workers to enjoy the benefits of union-won contracts without belonging to the union aren’t Republican creations. Most were passed in the 1940s and 1950s, when Southern states were solidly Democratic.
“Most workers are looking at it and saying: ‘This is the workplace. Whether Biden or Trump is president is not going to change what I’m paid,’” said Stephen Silvia, an American University political scientist and the author of a 2023 book, “The U.A.W.’s Southern Gamble: Organizing Workers at Foreign-Owned Vehicle Plants.”
Renee Berry, another member of the voluntary organizing committee in Chattanooga, said workers at the Volkswagen plant were impressed by the contracts that the U.A.W. won last year after striking General Motors, Ford and Stellantis, the parent of Chrysler, Jeep and Ram. “If they can do it, we can do it,” Berry told me.
“This is our plant,” she said. “It’s not about Trump. It’s not about Biden. It’s about us, getting what we deserve.”
Put yourself in the steel-toed boots of a worker at Volkswagen’s auto assembly plant in Chattanooga, Tenn. Let’s say you vote Republican — not a stretch, since Donald Trump got 60.7 percent of the popular vote in Tennessee in 2020, versus 46.9 percent nationally.
There’s a vote on whether to join the United Automobile Workers union, giving organized labor its first factorywide foothold at a major foreign automaker in the South. Are you a yes or a no?
We know now that the pro-union side won with nearly three-quarters of the vote in an election that ended on Friday. And while there’s no breakdown of the votes by party affiliation, it stands to reason that at least some of the people who voted for the union were Republicans — members of a party that, especially in the South, has been strongly anti-union.
I think what we saw in Chattanooga is workers voting on the basis of economics rather than party alignment. If that continues to happen elsewhere, the South could some day become as unionized as the rest of the country. It won’t happen quickly, though, because government officials and corporate groups are likely to continue to fight back.
Some opponents of the U.A.W.’s organizing clearly attempted to use some workers’ loyalty to Trump as leverage against the union. The website Still No U.A.W. featured a message from Trump on Truth Social that called Shawn Fain, the U.A.W. president, “a Weapon of Mass Destruction on Auto Workers and the Automobile Manufacturing Industry in the United States.” The same website said unions are “major donors to left-wing Democrats” and pointed out that President Biden supported the organizing effort in Chattanooga.
The governors of Alabama, Georgia, Mississippi, South Carolina, Tennessee and Texas, all Republicans, issued a statement just before the vote in Chattanooga warning that U.A.W. leaders “seem more focused on helping President Biden get re-elected than on the autoworker jobs being cut at plants they already represent.”
Yolanda Peoples, a member of the plant’s voluntary organizing committee, who told me she’s a Democrat, said the Republicans’ warnings were “an issue that we did face while we were organizing.” She said, “We were trying to leave politics out of what we had going on inside the plant.”
The outside pressure to vote against the union might have backfired, Peoples said. “My co-workers, whether they were anti- or for, they just got tired of politicians speaking on how we should run our plant. Instead of hurting us during our campaign, it actually helped us.”
I heard the same thing from Billy Dycus, the president of the Tennessee A.F.L.-C.I.O. Labor Council, who describes himself as a political independent. “People said, ‘Wait a minute, we don’t want to hear you tell us what to do anymore,’” he told me, referring to the six governors’ message. “We want to make up our own minds.”
The Detroit Free Press reported in 2020 that according to the U.A.W.’s 2016 postelection survey of its members, about a third of those who voted chose Trump. I think unions are benefiting from the same wave of populism that has helped lift Trump. Workers, including Republicans, appear to have lost confidence that their employers will look out for their best interests. Gallup reported last year that just 18 percent of Republicans have a “great deal” or “quite a lot” of confidence in big business, the lowest level since at least 1973. About twice as many, 35 percent, reported having little or no confidence in big business.
Labor unions, which claim to protect workers from management, seem attractive by comparison. Forty-seven percent of Republicans approved of labor unions last year, up from 26 percent in 2011, according to Gallup. That’s far less than the figures for Democrats (88 percent last year, 78 percent in 2011), but still pretty high.
I see the interest in unions as a rejection of Republican orthodoxy, but not necessarily a sign of budding support for Democrats. It’s worth noting that a majority of the right-to-work laws that allow workers to enjoy the benefits of union-won contracts without belonging to the union aren’t Republican creations. Most were passed in the 1940s and 1950s, when Southern states were solidly Democratic.
“Most workers are looking at it and saying: ‘This is the workplace. Whether Biden or Trump is president is not going to change what I’m paid,’” said Stephen Silvia, an American University political scientist and the author of a 2023 book, “The U.A.W.’s Southern Gamble: Organizing Workers at Foreign-Owned Vehicle Plants.”
Renee Berry, another member of the voluntary organizing committee in Chattanooga, said workers at the Volkswagen plant were impressed by the contracts that the U.A.W. won last year after striking General Motors, Ford and Stellantis, the parent of Chrysler, Jeep and Ram. “If they can do it, we can do it,” Berry told me.
“This is our plant,” she said. “It’s not about Trump. It’s not about Biden. It’s about us, getting what we deserve.”
(4/24/2024 5:52 PM, T.A. DeFeo)
(4/24/2024 6:12 PM, Amanda Aronczyk, et al.)
[TN] UAW’s Tennessee win fuels backers’ hopes in the South, but some skeptics are unmoved (NBC News)
(4/24/2024 3:43 PM, J.J. McCorvey)
(4/24/2024 8:00 AM, Whizy Kim)
[AL] Amazon warehouse workers in Alabama might get a third try at unionizing (National Public Radio)
(4/25/2024 5:01 AM, Alina Selyukh)
(4/24/2024 6:55 PM, William Thorton)
Law & Compliance
(4/24/2024 11:12 AM, J. Edward Moreno)
The U.S. Chamber of Commerce fulfilled its promise to sue the Federal Trade Commission over a ban on agreements that prevent workers from leaving a company for a rival, arguing in a lawsuit filed Wednesday that the agency overstepped its authority.
The lawsuit, filed in a U.S. District Court in Texas, argued that the F.T.C. did not have authority to issue rules that define unlawful methods of competition. The Chamber of Commerce was joined by three other business groups: the Business Roundtable, the Texas Association of Business and the Longview Chamber of Commerce.
The suit came a day after the F.T.C. announced a final rule to ban the noncompete agreements. The rule was approved in a 3-to-2 vote, with both Republican commissioners voting against the measure.
The Chamber of Commerce vowed to challenge the rule shortly after the vote. Its lawsuit called the ban “a vast overhaul of the national economy, and applies to a host of contracts that could not harm competition in any way.” It said the agency didn’t have the power to issue a ban and, even if it did, a categorical ban on such agreements wasn’t lawful.
Ryan LLC, a tax services firm in Dallas, also sued the F.T.C., generally raising similar arguments in a lawsuit filed in another U.S. District Court in Texas. Ryan is represented by Eugene Scalia, a partner at Gibson Dunn who was secretary of labor during the Trump administration.
Douglas Farrar, an F.T.C. spokesman, said in a statement that Congress empowered the agency to prevent “unfair methods of competition,” which it believes includes noncompete agreements.
“Our legal authority is crystal clear,” he said. “Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
The choice of forums for the lawsuits puts the challenges in front of Trump-appointed District Court judges, J. Campbell Barker in the Eastern District and Ada Brown in the Northern District. Any appeal would be sent to the Fifth Circuit Court of Appeals in New Orleans, where 12 of 17 judges were nominated by Republican presidents, with six by Mr. Trump.
Debbie Berman, a management-side lawyer at Jenner & Block, said the two lawsuits filed in Texas were just the beginning. She said the question of the F.T.C.’s authority to ban noncompetes would probably come up in every lawsuit pertaining to such agreements going forward, and various courts were likely to reach different conclusions, making it ripe for the Supreme Court to weigh in.
“This court has certainly signaled that it views agencies’ powers to be narrow and very tightly hewed to the legislation that they’re promulgating rules and regulations from,” Ms. Berman said.
The F.T.C.’s rule would void existing noncompete agreements, besides those applying to executives in “policy-making positions” who make at least $151,164 a year. It would also prevent companies from imposing new noncompetes, even on executives.
It is set to become law 120 days after it is published in the Federal Register, probably this week, though it may be tied up in a long legal battle.
Companies generally use noncompetes to protect trade secrets and to avoid spending money to train employees who can hop over to a competitor. The F.T.C. and worker advocates say that noncompete agreements suppress competition for labor, pushing down wages.
The agency’s rule was supported by unions, including the A.F.L.-C.I.O. and North America’s Building Trades Unions. Business groups opposing the rule included the Securities Industry and Financial Markets Association, a trade organization that represents Wall Street, and the American Trucking Associations.
The challenges to the rule center on whether the F.T.C. has the power to make such sweeping decisions.
In its final rule, the agency said Congress empowered it to adopt rules “for the purpose of preventing unfair methods of competition” and “defining certain conduct as an unfair method of competition.”
The F.T.C. has leaned on a 1973 appellate court decision — National Petroleum Refiners Association v. F.T.C. — that allowed the agency to issue substantive rules. That case addressed the agency’s ability to require octane ratings be posted on gas pumps.
William Kovacic, a former F.T.C. chair, said the agency might face an uphill battle fending off the challenges to its rule on noncompetes.
“The F.T.C. believes that earlier jurisprudence and legislation has created a bridge over which its noncompete rule can travel,” Mr. Kovacic said. “The hazard for the commission and its rule is that the bridge is fragile, and the F.T.C. wants to drive a very heavy truck over it.”
The attempts to block the F.T.C.’s noncompete rule come amid a broader pushback by some businesses, lawmakers and others against the power of executive agencies.
The Supreme Court is expected to decide by June on a case seeking a much more narrow interpretation of the powers federal agencies are granted. That case, like the ones against the F.T.C., seek to limit the agencies’ power to those explicitly granted by Congress.
Companies including SpaceX, Trader Joe’s and Amazon have filed lawsuits arguing that the National Labor Relations Board, which regulates labor relations, is unconstitutional.
Neil Bradley, the chief policy officer at the Chamber of Commerce, said those kinds of challenges are a “reasonable reaction” to federal agencies that have sought to expand their authorities.
“It’s that kind of regulatory overreach into micromanagement, and the new precedents that agencies are trying to set, that’s fueling a lot of the concern in the business community,” he said.
Laura Padin, a lawyer at the National Employment Law Project, said a sympathetic Supreme Court had “emboldened” businesses to bring more challenges to agencies’ power. By arguing that every regulation should be explicitly ordered by Congress, which often deadlocks on legislation, business groups are essentially asking not to be subject any new requirements, she said.
“What we’ve seen is this resurgence of corporations challenging the basic authority of administrative agencies to do their basic tasks,” Ms. Padin said.
The U.S. Chamber of Commerce fulfilled its promise to sue the Federal Trade Commission over a ban on agreements that prevent workers from leaving a company for a rival, arguing in a lawsuit filed Wednesday that the agency overstepped its authority.
The lawsuit, filed in a U.S. District Court in Texas, argued that the F.T.C. did not have authority to issue rules that define unlawful methods of competition. The Chamber of Commerce was joined by three other business groups: the Business Roundtable, the Texas Association of Business and the Longview Chamber of Commerce.
The suit came a day after the F.T.C. announced a final rule to ban the noncompete agreements. The rule was approved in a 3-to-2 vote, with both Republican commissioners voting against the measure.
The Chamber of Commerce vowed to challenge the rule shortly after the vote. Its lawsuit called the ban “a vast overhaul of the national economy, and applies to a host of contracts that could not harm competition in any way.” It said the agency didn’t have the power to issue a ban and, even if it did, a categorical ban on such agreements wasn’t lawful.
Ryan LLC, a tax services firm in Dallas, also sued the F.T.C., generally raising similar arguments in a lawsuit filed in another U.S. District Court in Texas. Ryan is represented by Eugene Scalia, a partner at Gibson Dunn who was secretary of labor during the Trump administration.
Douglas Farrar, an F.T.C. spokesman, said in a statement that Congress empowered the agency to prevent “unfair methods of competition,” which it believes includes noncompete agreements.
“Our legal authority is crystal clear,” he said. “Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
The choice of forums for the lawsuits puts the challenges in front of Trump-appointed District Court judges, J. Campbell Barker in the Eastern District and Ada Brown in the Northern District. Any appeal would be sent to the Fifth Circuit Court of Appeals in New Orleans, where 12 of 17 judges were nominated by Republican presidents, with six by Mr. Trump.
Debbie Berman, a management-side lawyer at Jenner & Block, said the two lawsuits filed in Texas were just the beginning. She said the question of the F.T.C.’s authority to ban noncompetes would probably come up in every lawsuit pertaining to such agreements going forward, and various courts were likely to reach different conclusions, making it ripe for the Supreme Court to weigh in.
“This court has certainly signaled that it views agencies’ powers to be narrow and very tightly hewed to the legislation that they’re promulgating rules and regulations from,” Ms. Berman said.
The F.T.C.’s rule would void existing noncompete agreements, besides those applying to executives in “policy-making positions” who make at least $151,164 a year. It would also prevent companies from imposing new noncompetes, even on executives.
It is set to become law 120 days after it is published in the Federal Register, probably this week, though it may be tied up in a long legal battle.
Companies generally use noncompetes to protect trade secrets and to avoid spending money to train employees who can hop over to a competitor. The F.T.C. and worker advocates say that noncompete agreements suppress competition for labor, pushing down wages.
The agency’s rule was supported by unions, including the A.F.L.-C.I.O. and North America’s Building Trades Unions. Business groups opposing the rule included the Securities Industry and Financial Markets Association, a trade organization that represents Wall Street, and the American Trucking Associations.
The challenges to the rule center on whether the F.T.C. has the power to make such sweeping decisions.
In its final rule, the agency said Congress empowered it to adopt rules “for the purpose of preventing unfair methods of competition” and “defining certain conduct as an unfair method of competition.”
The F.T.C. has leaned on a 1973 appellate court decision — National Petroleum Refiners Association v. F.T.C. — that allowed the agency to issue substantive rules. That case addressed the agency’s ability to require octane ratings be posted on gas pumps.
William Kovacic, a former F.T.C. chair, said the agency might face an uphill battle fending off the challenges to its rule on noncompetes.
“The F.T.C. believes that earlier jurisprudence and legislation has created a bridge over which its noncompete rule can travel,” Mr. Kovacic said. “The hazard for the commission and its rule is that the bridge is fragile, and the F.T.C. wants to drive a very heavy truck over it.”
The attempts to block the F.T.C.’s noncompete rule come amid a broader pushback by some businesses, lawmakers and others against the power of executive agencies.
The Supreme Court is expected to decide by June on a case seeking a much more narrow interpretation of the powers federal agencies are granted. That case, like the ones against the F.T.C., seek to limit the agencies’ power to those explicitly granted by Congress.
Companies including SpaceX, Trader Joe’s and Amazon have filed lawsuits arguing that the National Labor Relations Board, which regulates labor relations, is unconstitutional.
Neil Bradley, the chief policy officer at the Chamber of Commerce, said those kinds of challenges are a “reasonable reaction” to federal agencies that have sought to expand their authorities.
“It’s that kind of regulatory overreach into micromanagement, and the new precedents that agencies are trying to set, that’s fueling a lot of the concern in the business community,” he said.
Laura Padin, a lawyer at the National Employment Law Project, said a sympathetic Supreme Court had “emboldened” businesses to bring more challenges to agencies’ power. By arguing that every regulation should be explicitly ordered by Congress, which often deadlocks on legislation, business groups are essentially asking not to be subject any new requirements, she said.
“What we’ve seen is this resurgence of corporations challenging the basic authority of administrative agencies to do their basic tasks,” Ms. Padin said.
(4/24/2024 11:10 AM, Julian Mark)
The U.S. Chamber of Commerce and other business groups on Wednesday sued the Federal Trade Commission over a new rule that would make most noncompete agreements illegal, setting up a potential showdown over the scope of the agency’s authority.
The lawsuit, filed in federal court in the Eastern District of Texas, comes a day after the FTC voted 3-2 to issue a rule that bans noncompete agreements, which restrict workers from switching employers within their industry. The agency estimates that 30 million workers are bound by the agreements, and proponents of the ban say it will raise wages, bolster innovation, foster new businesses and reduce health-care costs.
But the chamber contends in its lawsuit that the agency lacks the authority to issue such a sweeping and consequential rule, and it is asking the court to overturn it. The chamber has opposed the rule since it was proposed 16 months ago, arguing that it would hurt businesses’ ability to protect proprietary information and reduce their incentive to invest in workers to prevent them from jumping to a rival employer.
“The Commission’s astounding assertion of power breaks with centuries of state and federal law and rests on novel claims of authority by the Commission,” the lawsuit states.
The FTC defended its stance on Wednesday, asserting that its rulemaking authority is “crystal clear.”
“This authority has repeatedly been upheld by courts and reaffirmed by Congress,” said agency spokesman Douglas Farrar. “Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
The suit comes as the power of federal agencies faces intense legal scrutiny, with the Supreme Court in recent years inclined to limit the scope of the administrative state. The court is set to decide two cases that experts say could bear directly on the lawsuit against the FTC because they deal with the scope of agency power and whether courts can defer to agencies’ interpretation of the laws they administer.
Crucially, the justices in 2022 introduced the “major-questions doctrine” in curtailing the Environmental Protection Agency’s ability to reduce carbon emissions at power plants. The doctrine holds that an agency must have clear congressional authorization before it takes action of major economic and political significance. The high court similarly reined in the Centers for Disease Control and Prevention in ending its moratorium on evictions, as well as the Occupational Safety and Health Administration’s far-reaching vaccine requirement.
“We have a Supreme Court that has a majority that’s looking skeptically at the exercise of governing power by administrative agencies like the Federal Trade Commission,” said Cary Coglianese, a law professor at the University of Pennsylvania, adding that he would not be surprised if a lower court struck down the FTC’s noncompete rule and the case landed before the Supreme Court.
The chamber’s lawsuit alleges that the noncompete rule would not survive scrutiny under the major-questions doctrine. It also alleges that the FTC has misinterpreted its authority in considering noncompete agreements “unfair methods of competition.”
The business groups further argue that the rule would unlawfully disrupt existing agreements between employees and employers. And they contend that it is not supported by sufficient evidence and that the agency did not consider alternatives.
“Since its inception over 100 years ago, the FTC has never been granted the constitutional and statutory authority to write its own competition rules,” Suzanne P. Clark, the chamber’s CEO, said in a statement Wednesday.
FTC Chair Lina M. Khan rejected such arguments during a commission meeting Tuesday before the rule passed, arguing that noncompete agreements count as “unfair methods of competition” under the Federal Trade Commission Act.
“To my mind, arguing that the FTC lacks this authority requires ignoring the most straightforward reading of the text,” she said, adding that a large body of case law supports the agency’s interpretation.
The FTC rule was first proposed in January 2023, with backers highlighting research that showed noncompete agreements suppress wages, stifle entrepreneurship, create frictions in the job market — and are widespread even among low- and middle-income earners in a range of professions, including hairstylists, janitors and ballroom dancers.
The ban on noncompete agreements would take effect in about four months unless the courts block it. The rule would prohibit employers from entering into noncompete agreements with workers and effectively invalidate existing noncompetes for all workers except for senior executives, who compose less than 1 percent of the workforce, according to the FTC.
The U.S. Chamber of Commerce and other business groups on Wednesday sued the Federal Trade Commission over a new rule that would make most noncompete agreements illegal, setting up a potential showdown over the scope of the agency’s authority.
The lawsuit, filed in federal court in the Eastern District of Texas, comes a day after the FTC voted 3-2 to issue a rule that bans noncompete agreements, which restrict workers from switching employers within their industry. The agency estimates that 30 million workers are bound by the agreements, and proponents of the ban say it will raise wages, bolster innovation, foster new businesses and reduce health-care costs.
But the chamber contends in its lawsuit that the agency lacks the authority to issue such a sweeping and consequential rule, and it is asking the court to overturn it. The chamber has opposed the rule since it was proposed 16 months ago, arguing that it would hurt businesses’ ability to protect proprietary information and reduce their incentive to invest in workers to prevent them from jumping to a rival employer.
“The Commission’s astounding assertion of power breaks with centuries of state and federal law and rests on novel claims of authority by the Commission,” the lawsuit states.
The FTC defended its stance on Wednesday, asserting that its rulemaking authority is “crystal clear.”
“This authority has repeatedly been upheld by courts and reaffirmed by Congress,” said agency spokesman Douglas Farrar. “Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
The suit comes as the power of federal agencies faces intense legal scrutiny, with the Supreme Court in recent years inclined to limit the scope of the administrative state. The court is set to decide two cases that experts say could bear directly on the lawsuit against the FTC because they deal with the scope of agency power and whether courts can defer to agencies’ interpretation of the laws they administer.
Crucially, the justices in 2022 introduced the “major-questions doctrine” in curtailing the Environmental Protection Agency’s ability to reduce carbon emissions at power plants. The doctrine holds that an agency must have clear congressional authorization before it takes action of major economic and political significance. The high court similarly reined in the Centers for Disease Control and Prevention in ending its moratorium on evictions, as well as the Occupational Safety and Health Administration’s far-reaching vaccine requirement.
“We have a Supreme Court that has a majority that’s looking skeptically at the exercise of governing power by administrative agencies like the Federal Trade Commission,” said Cary Coglianese, a law professor at the University of Pennsylvania, adding that he would not be surprised if a lower court struck down the FTC’s noncompete rule and the case landed before the Supreme Court.
The chamber’s lawsuit alleges that the noncompete rule would not survive scrutiny under the major-questions doctrine. It also alleges that the FTC has misinterpreted its authority in considering noncompete agreements “unfair methods of competition.”
The business groups further argue that the rule would unlawfully disrupt existing agreements between employees and employers. And they contend that it is not supported by sufficient evidence and that the agency did not consider alternatives.
“Since its inception over 100 years ago, the FTC has never been granted the constitutional and statutory authority to write its own competition rules,” Suzanne P. Clark, the chamber’s CEO, said in a statement Wednesday.
FTC Chair Lina M. Khan rejected such arguments during a commission meeting Tuesday before the rule passed, arguing that noncompete agreements count as “unfair methods of competition” under the Federal Trade Commission Act.
“To my mind, arguing that the FTC lacks this authority requires ignoring the most straightforward reading of the text,” she said, adding that a large body of case law supports the agency’s interpretation.
The FTC rule was first proposed in January 2023, with backers highlighting research that showed noncompete agreements suppress wages, stifle entrepreneurship, create frictions in the job market — and are widespread even among low- and middle-income earners in a range of professions, including hairstylists, janitors and ballroom dancers.
The ban on noncompete agreements would take effect in about four months unless the courts block it. The rule would prohibit employers from entering into noncompete agreements with workers and effectively invalidate existing noncompetes for all workers except for senior executives, who compose less than 1 percent of the workforce, according to the FTC.
(4/24/2024 4:57 PM, Dave Michaels)
Top business groups and a national tax-services firm filed lawsuits Wednesday challenging a new Federal Trade Commission ban on noncompete agreements, cases that will test the agency’s power to broadly prohibit practices it says are anticompetitive.
The U.S. Chamber of Commerce challenged the regulation in federal court in East Texas while the tax firm Ryan LLC filed its lawsuit in Dallas federal court. Other business groups joined the Chamber’s suit—including the Business Roundtable, which represents chief executive officers of some of the country’s biggest employers.
The rule, issued by the FTC on Tuesday, prohibits companies from enforcing existing noncompete agreements on anyone other than senior executives. The FTC says one in five Americans is subject to noncompete agreements.
“It’s one of the most outrageous examples of government overreach that I have seen,” Brint Ryan, CEO of Ryan LLC, said in an interview. “It’s such an aggressive position.”
An FTC spokesman defended the measure. “Our legal authority is crystal-clear,” Douglas Farrar said. “Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
The FTC argues that noncompete clauses, which typically prevent workers from taking a new job or starting a business for a certain time period after leaving an employer, hamper competition for labor and result in lower pay and benefits for workers.
Even lower-wage workers such as security guards and hair stylists, who lack access to intellectual property or trade secrets, have occasionally been subject to them. Physicians are sometimes subject to noncompete clauses, and some have been forced to move from one state to another to practice medicine at a new employer, FTC Commissioner Alvaro Bedoya said Tuesday.
“There are doctors who cannot work because of a noncompete,” said Bedoya, a Democratic member of the FTC who voted to approve the regulation, which passed on a 3-to-2 party-line vote.
Protecting businesses
Businesses that use noncompetes say they are an effective way to protect their intellectual property, customer relationships and other investments.
Ryan LLC is a tax-services and software firm based in Dallas that says it would have to abandon noncompete agreements imposed on more than 200 partners involved in the firm’s tax practice. The restrictions protect the firm’s confidential information and the strategies that Ryan’s employees develop, the company said in its lawsuit. They also promote investments in training, Ryan argued.
Other measures, such as nondisclosure agreements, don’t protect companies as well, Brint Ryan said. Companies have to investigate and litigate if they believe an NDA was violated, he said.
The Chamber of Commerce’s lawsuit says that policymakers and courts have for decades recognized the value of noncompete agreements and that state governments can put curbs on them “when they go too far.” The federal government has never regulated noncompete contracts, the Chamber says, and Congress never authorized the FTC to step in and take over for the states.
The Chamber frequently sues the federal government over regulations it says were erroneously drafted or exceed an agency’s authority. The Chamber and Ryan filed their lawsuits in conservative judicial districts where courts have been skeptical of what they see as federal agency overreach.
“I think the venue increases the chance that the rule is enjoined pretty quickly,” said Laura O’Donnell, an employment and labor litigator for Haynes Boone in San Antonio.
Employers that use noncompetes shouldn’t rip them up right away, she added. A court could at least temporarily block the rule before it takes effect in four months, she said.
The law on noncompetes varies by state. Texas, for instance, allows the contracts if employees have access to confidential information or were given specialized training, O’Donnell said. California bans them, which allows talented engineers and other sought-after workers to change jobs easily.
Hampering competition
The FTC’s ban on noncompetes is the capstone of a larger set of moves at the agency that have elevated the interests of workers in antitrust enforcement. The Biden administration called for eliminating noncompetes in 2021, when the White House issued a blueprint for stricter enforcement of the antitrust laws.
Noncompete restrictions hamper competition for labor, the FTC says, because employees can’t easily leave for higher pay and better benefits. Removing them would boost employee earnings by $400 billion or more over 10 years, the FTC estimates.
The basis for regulating noncompete clauses comes from a 110-year-old law that prohibits unfair methods of competition, the FTC says. The agency first said in the 1960s that it could use that authority to write competition regulations. But it hadn’t issued a new competition rule for more than 50 years—until completing the noncompete measure on Tuesday.
The FTC should have a strong argument in court to defend its move, said John Newman, a law professor at the University of Miami who previously served as a deputy director of the FTC’s competition bureau during the Biden administration. The statute says the FTC may “classify corporations” and “make rules and regulations.”
“The agency’s leaders are saying, ‘Hey, we are just taking the statutory text on its face. The statue says we have the right to enact rules,’” Newman said.
Other lawyers say that wording refers only to how the FTC carries out enforcement duties and doesn’t support issuing economywide regulations.
FTC Chair Lina Khan said early in her tenure that enforcers should challenge deals and practices even when it wasn’t clear if courts would agree with the agency. The FTC could still get its message out in a losing effort, she said.
Similarly, even if a court strikes down the noncompetes rule, state legislators might take notice and further restrict them, said Bill Baer, an antitrust expert at the Brookings Institution who led antitrust enforcement at the Justice Department from 2013 to 2016.
“By shining a light on the problem, the FTC has exposed a significant drag on the economy,” he said.
Top business groups and a national tax-services firm filed lawsuits Wednesday challenging a new Federal Trade Commission ban on noncompete agreements, cases that will test the agency’s power to broadly prohibit practices it says are anticompetitive.
The U.S. Chamber of Commerce challenged the regulation in federal court in East Texas while the tax firm Ryan LLC filed its lawsuit in Dallas federal court. Other business groups joined the Chamber’s suit—including the Business Roundtable, which represents chief executive officers of some of the country’s biggest employers.
The rule, issued by the FTC on Tuesday, prohibits companies from enforcing existing noncompete agreements on anyone other than senior executives. The FTC says one in five Americans is subject to noncompete agreements.
“It’s one of the most outrageous examples of government overreach that I have seen,” Brint Ryan, CEO of Ryan LLC, said in an interview. “It’s such an aggressive position.”
An FTC spokesman defended the measure. “Our legal authority is crystal-clear,” Douglas Farrar said. “Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
The FTC argues that noncompete clauses, which typically prevent workers from taking a new job or starting a business for a certain time period after leaving an employer, hamper competition for labor and result in lower pay and benefits for workers.
Even lower-wage workers such as security guards and hair stylists, who lack access to intellectual property or trade secrets, have occasionally been subject to them. Physicians are sometimes subject to noncompete clauses, and some have been forced to move from one state to another to practice medicine at a new employer, FTC Commissioner Alvaro Bedoya said Tuesday.
“There are doctors who cannot work because of a noncompete,” said Bedoya, a Democratic member of the FTC who voted to approve the regulation, which passed on a 3-to-2 party-line vote.
Protecting businesses
Businesses that use noncompetes say they are an effective way to protect their intellectual property, customer relationships and other investments.
Ryan LLC is a tax-services and software firm based in Dallas that says it would have to abandon noncompete agreements imposed on more than 200 partners involved in the firm’s tax practice. The restrictions protect the firm’s confidential information and the strategies that Ryan’s employees develop, the company said in its lawsuit. They also promote investments in training, Ryan argued.
Other measures, such as nondisclosure agreements, don’t protect companies as well, Brint Ryan said. Companies have to investigate and litigate if they believe an NDA was violated, he said.
The Chamber of Commerce’s lawsuit says that policymakers and courts have for decades recognized the value of noncompete agreements and that state governments can put curbs on them “when they go too far.” The federal government has never regulated noncompete contracts, the Chamber says, and Congress never authorized the FTC to step in and take over for the states.
The Chamber frequently sues the federal government over regulations it says were erroneously drafted or exceed an agency’s authority. The Chamber and Ryan filed their lawsuits in conservative judicial districts where courts have been skeptical of what they see as federal agency overreach.
“I think the venue increases the chance that the rule is enjoined pretty quickly,” said Laura O’Donnell, an employment and labor litigator for Haynes Boone in San Antonio.
Employers that use noncompetes shouldn’t rip them up right away, she added. A court could at least temporarily block the rule before it takes effect in four months, she said.
The law on noncompetes varies by state. Texas, for instance, allows the contracts if employees have access to confidential information or were given specialized training, O’Donnell said. California bans them, which allows talented engineers and other sought-after workers to change jobs easily.
Hampering competition
The FTC’s ban on noncompetes is the capstone of a larger set of moves at the agency that have elevated the interests of workers in antitrust enforcement. The Biden administration called for eliminating noncompetes in 2021, when the White House issued a blueprint for stricter enforcement of the antitrust laws.
Noncompete restrictions hamper competition for labor, the FTC says, because employees can’t easily leave for higher pay and better benefits. Removing them would boost employee earnings by $400 billion or more over 10 years, the FTC estimates.
The basis for regulating noncompete clauses comes from a 110-year-old law that prohibits unfair methods of competition, the FTC says. The agency first said in the 1960s that it could use that authority to write competition regulations. But it hadn’t issued a new competition rule for more than 50 years—until completing the noncompete measure on Tuesday.
The FTC should have a strong argument in court to defend its move, said John Newman, a law professor at the University of Miami who previously served as a deputy director of the FTC’s competition bureau during the Biden administration. The statute says the FTC may “classify corporations” and “make rules and regulations.”
“The agency’s leaders are saying, ‘Hey, we are just taking the statutory text on its face. The statue says we have the right to enact rules,’” Newman said.
Other lawyers say that wording refers only to how the FTC carries out enforcement duties and doesn’t support issuing economywide regulations.
FTC Chair Lina Khan said early in her tenure that enforcers should challenge deals and practices even when it wasn’t clear if courts would agree with the agency. The FTC could still get its message out in a losing effort, she said.
Similarly, even if a court strikes down the noncompetes rule, state legislators might take notice and further restrict them, said Bill Baer, an antitrust expert at the Brookings Institution who led antitrust enforcement at the Justice Department from 2013 to 2016.
“By shining a light on the problem, the FTC has exposed a significant drag on the economy,” he said.
(4/24/2024 11:15 AM, Leah Nylen)
Business groups led by the US Chamber of Commerce sued the Federal Trade Commission Wednesday seeking to block a rule finalized this week that would outlaw non-compete provisions that prohibit workers from switching jobs within an industry.
In a complaint filed in Texas federal court, the nation’s largest business lobby argued that the antitrust and consumer protection agency lacks the authority to issue rules that define unfair methods of competition. The FTC Act, which established the agency, allows it to bring cases challenging particular practices, the group said, but not to write rules. The Chamber was joined by Business Roundtable and several Texas business groups in challenging the rule.
“The Commission’s categorical ban on virtually all non-competes amounts to a vast overhaul of the national economy,” the Chamber said in the complaint. The rule “reflects an unlawful and unprecedented exercise of bureaucratic power.”
However, the regulator argued that its legal authority is “crystal clear” in the FTC Act.
“Congress specifically ‘empowered and directed’ the FTC to prevent ‘unfair methods of competition’ and to ‘make rules and regulations for the purposes of carrying out the provisions’” of the law, FTC spokesperson Douglas Farrar said. “This authority has repeatedly been upheld by courts and reaffirmed by Congress. Addressing non-competes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
The FTC voted 3-2 along party lines on Tuesday to issue a final rule banning non-competes in nearly all cases. The agency’s two Republicans dissented, adopting arguments similar to the business group that the FTC lacks clear congressional authority to write rules.
Democrats argued that the law explicitly allows the FTC to prohibit unfair methods of competition while another provision authorizes the agency “to make rules and regulations for the purpose of carrying out the provisions of” the law. Taken together, those provisions permit the FTC to issue rules defining unfair conduct, they say, citing a 1973 case that upheld the agency’s rulemaking authority.
Business groups led by the US Chamber of Commerce sued the Federal Trade Commission Wednesday seeking to block a rule finalized this week that would outlaw non-compete provisions that prohibit workers from switching jobs within an industry.
In a complaint filed in Texas federal court, the nation’s largest business lobby argued that the antitrust and consumer protection agency lacks the authority to issue rules that define unfair methods of competition. The FTC Act, which established the agency, allows it to bring cases challenging particular practices, the group said, but not to write rules. The Chamber was joined by Business Roundtable and several Texas business groups in challenging the rule.
“The Commission’s categorical ban on virtually all non-competes amounts to a vast overhaul of the national economy,” the Chamber said in the complaint. The rule “reflects an unlawful and unprecedented exercise of bureaucratic power.”
However, the regulator argued that its legal authority is “crystal clear” in the FTC Act.
“Congress specifically ‘empowered and directed’ the FTC to prevent ‘unfair methods of competition’ and to ‘make rules and regulations for the purposes of carrying out the provisions’” of the law, FTC spokesperson Douglas Farrar said. “This authority has repeatedly been upheld by courts and reaffirmed by Congress. Addressing non-competes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
The FTC voted 3-2 along party lines on Tuesday to issue a final rule banning non-competes in nearly all cases. The agency’s two Republicans dissented, adopting arguments similar to the business group that the FTC lacks clear congressional authority to write rules.
Democrats argued that the law explicitly allows the FTC to prohibit unfair methods of competition while another provision authorizes the agency “to make rules and regulations for the purpose of carrying out the provisions of” the law. Taken together, those provisions permit the FTC to issue rules defining unfair conduct, they say, citing a 1973 case that upheld the agency’s rulemaking authority.
(4/24/2024 10:53 AM, Taylor Giorno)
(4/24/2024 12:00 PM, David Dayen)
(4/24/2024 6:00 AM, Grace Eliza Goodwin)
(4/24/2024 4:34 PM, Taylor Telford)
The Federal Trade Commission has banned noncompete agreements for most of the U.S. workforce, freeing an estimated 30 million people bound by contracts that limit their ability to change jobs within their industry or strike out on their own.
Labor advocates cheered Tuesday’s decision as a huge victory for workers, arguing that such agreements smother competition and hinder Americans’ earning powers. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market,” FTC Chair Lina M. Khan said in a statement after the panel’s 3-2 vote.
But the rule change has sparked a legal showdown with the U.S. Chamber of Commerce, big businesses and lobbying groups, which contend in a federal lawsuit filed Wednesday that it will limit their ability to protect trade secrets and other confidential information.
What are noncompete agreements?
Noncompete agreements — which restrict a worker’s ability to switch employers within their industry — have been standard practice for decades. Roughly 1 in 5 U.S. workers operate under noncompetes, the FTC estimates, from hourly workers to CEOs. These measures are particularly common in industries such as technology, sales, finance and health care, as well as hairstyling, fitness and broadcast media.
“These contracts and noncompetes were developed in the first place to prevent employees from easily switching to rival firms, or to new positions,” Michelle Hay, global chief people officer at the business solutions company Sedgwick, told The Post, adding that “noncompetes have been governed on a state-by-state basis for more than 200 years.”
The language in these contracts can be used to prevent an employee from going to work for a competitor, or starting a competing business, “typically within a certain geographic area and period of time after the worker’s employment ends,” the FTC notes.
Why did the FTC ban them?
The FTC contends that noncompete clauses ultimately decrease competition by preventing workers from pursuing opportunities within the same industry and “lower wages for both workers who are subject to them as well as workers who are not.”
“Noncompete clauses also prevent new businesses from forming, stifling entrepreneurship, and prevent novel innovation which would otherwise occur when workers are able to broadly share their ideas,” the regulatory agency says on its website.
Doing away with noncompetes would increase business formation across the country by 2.7 percent, or 8,500 additional businesses each year, the FTC projects. The regulator also expects that the final rule will increase earnings for the average worker by $524 per year and lower health-care costs by as much as $194 billion over the next decade.
The origins of the ban trace to 2021, when President Biden ordered the agency to curtail the use of noncompete agreements as part of an executive order meant to promote competition in the U.S. economy.
The ban, which is the latest step in a major effort by the FTC to expand the boundaries of antitrust enforcement, is set to take effect in 120 days. But it could face disruption from legal challenges, which already are underway.
How does this change things for workers?
The ban would void existing noncompete agreements and broadly bar them in the future, allowing workers to “pursue better opportunities, shake up the market and push megacorporations towards fair practices,” said Liz Zelnick, director of the economic security and corporate power program at Accountable US, a nonpartisan government watchdog.
“Noncompete clauses force employees to endure low wages and poor working conditions,” Zelnick said in comments emailed to The Washington Post.
Although they are extremely common, such agreements are “very unpopular and very difficult to deal with” for workers, according to Peter Rahbar, a New York-based employment lawyer. He noted that the rule received overwhelming support from workers and labor advocates, with roughly 25,000 of the 26,000 public comments received by the FTC coming from those in support of a ban.
In the past decade, he noted, growing attention has been paid to the noncompetes being used on low-income workers, like at sandwich maker Jimmy John’s.
“They’re very scary for the individual no matter how highly compensated they are,” Rahbar said.
How will employers be affected?
Emily Dickens, chief of staff and head of government affairs at the Society for Human Resource Management, said blanket bans on noncompete agreements “pose significant challenges for HR professionals tasked with safeguarding their employers’ intellectual property and preventing unfair competition.”
“We recognize and appreciate the FTC’s commitment to advancing worker mobility. However, we firmly believe that this objective can be achieved without disregarding employers’ rights to protect their investments in training and intellectual property,” Dickens said Tuesday in a statement.
The biggest employers will be the most affected, “but even they’ve been bracing for this reality for a long time,” said Chambord Benton-Hayes, an employment lawyer based in Oakland, Calif.
While some companies have concerns that a noncompete ban would make their trade secrets and other proprietary information vulnerable to exposure, most of them “also have nondisclosure agreements and confidentiality clauses, which should give them all the protection they need on that front,” Benton-Hayes said in comments emailed to The Post.
The ban would give employers incentive to “expand the development and training offered to employees, to provide more comprehensive benefits packages, and to create a workplace environment that promotes long-term employment with a company,” Benton-Hayes said. “In addition, employers will have to be more creative with compensation for retention purposes.”
Is the ban final, or will it face challenges?
The rule change is already facing pushback, which could halt its implementation. On Wednesday, the U.S. Chamber of Commerce and other business groups sued the FTC in federal court in the Eastern District of Texas. They are asking the court to issue an injunction to prevent the rule from taking effect, arguing that the FTC’s decision “breaks with centuries of state and federal law and rests on novel claims of authority by the Commission,” according to the lawsuit.
Whether the FTC has the authority to make this rule “is going to be the central point of challenge,” according to Rahbar. That lawsuit and future challenges will probably hinge on whether the agency can legally force such a broad change on an issue Congress did not direct the regulator to take up, he said.
“Over the past few years, there have been significant challenges to administrative agencies and the scope of their powers to make rules and regulations in areas where Congress hasn’t instructed them to do so,” Rahbar said. “Traditionally, there’s been a lot of deference to agency rulemaking authority.”
Gregory Brown, a commercial litigation lawyer with Hill Ward Henderson, said the rule creates a landscape of uncertainty for employers and employees, given how broad the language is and how the FTC is exercising its power.
“There will be direct challenges to this rule, constitutional challenges and some challenges about the FTC’s authority,” Brown said. “I think chaos ensues from here.”
The Federal Trade Commission has banned noncompete agreements for most of the U.S. workforce, freeing an estimated 30 million people bound by contracts that limit their ability to change jobs within their industry or strike out on their own.
Labor advocates cheered Tuesday’s decision as a huge victory for workers, arguing that such agreements smother competition and hinder Americans’ earning powers. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market,” FTC Chair Lina M. Khan said in a statement after the panel’s 3-2 vote.
But the rule change has sparked a legal showdown with the U.S. Chamber of Commerce, big businesses and lobbying groups, which contend in a federal lawsuit filed Wednesday that it will limit their ability to protect trade secrets and other confidential information.
What are noncompete agreements?
Noncompete agreements — which restrict a worker’s ability to switch employers within their industry — have been standard practice for decades. Roughly 1 in 5 U.S. workers operate under noncompetes, the FTC estimates, from hourly workers to CEOs. These measures are particularly common in industries such as technology, sales, finance and health care, as well as hairstyling, fitness and broadcast media.
“These contracts and noncompetes were developed in the first place to prevent employees from easily switching to rival firms, or to new positions,” Michelle Hay, global chief people officer at the business solutions company Sedgwick, told The Post, adding that “noncompetes have been governed on a state-by-state basis for more than 200 years.”
The language in these contracts can be used to prevent an employee from going to work for a competitor, or starting a competing business, “typically within a certain geographic area and period of time after the worker’s employment ends,” the FTC notes.
Why did the FTC ban them?
The FTC contends that noncompete clauses ultimately decrease competition by preventing workers from pursuing opportunities within the same industry and “lower wages for both workers who are subject to them as well as workers who are not.”
“Noncompete clauses also prevent new businesses from forming, stifling entrepreneurship, and prevent novel innovation which would otherwise occur when workers are able to broadly share their ideas,” the regulatory agency says on its website.
Doing away with noncompetes would increase business formation across the country by 2.7 percent, or 8,500 additional businesses each year, the FTC projects. The regulator also expects that the final rule will increase earnings for the average worker by $524 per year and lower health-care costs by as much as $194 billion over the next decade.
The origins of the ban trace to 2021, when President Biden ordered the agency to curtail the use of noncompete agreements as part of an executive order meant to promote competition in the U.S. economy.
The ban, which is the latest step in a major effort by the FTC to expand the boundaries of antitrust enforcement, is set to take effect in 120 days. But it could face disruption from legal challenges, which already are underway.
How does this change things for workers?
The ban would void existing noncompete agreements and broadly bar them in the future, allowing workers to “pursue better opportunities, shake up the market and push megacorporations towards fair practices,” said Liz Zelnick, director of the economic security and corporate power program at Accountable US, a nonpartisan government watchdog.
“Noncompete clauses force employees to endure low wages and poor working conditions,” Zelnick said in comments emailed to The Washington Post.
Although they are extremely common, such agreements are “very unpopular and very difficult to deal with” for workers, according to Peter Rahbar, a New York-based employment lawyer. He noted that the rule received overwhelming support from workers and labor advocates, with roughly 25,000 of the 26,000 public comments received by the FTC coming from those in support of a ban.
In the past decade, he noted, growing attention has been paid to the noncompetes being used on low-income workers, like at sandwich maker Jimmy John’s.
“They’re very scary for the individual no matter how highly compensated they are,” Rahbar said.
How will employers be affected?
Emily Dickens, chief of staff and head of government affairs at the Society for Human Resource Management, said blanket bans on noncompete agreements “pose significant challenges for HR professionals tasked with safeguarding their employers’ intellectual property and preventing unfair competition.”
“We recognize and appreciate the FTC’s commitment to advancing worker mobility. However, we firmly believe that this objective can be achieved without disregarding employers’ rights to protect their investments in training and intellectual property,” Dickens said Tuesday in a statement.
The biggest employers will be the most affected, “but even they’ve been bracing for this reality for a long time,” said Chambord Benton-Hayes, an employment lawyer based in Oakland, Calif.
While some companies have concerns that a noncompete ban would make their trade secrets and other proprietary information vulnerable to exposure, most of them “also have nondisclosure agreements and confidentiality clauses, which should give them all the protection they need on that front,” Benton-Hayes said in comments emailed to The Post.
The ban would give employers incentive to “expand the development and training offered to employees, to provide more comprehensive benefits packages, and to create a workplace environment that promotes long-term employment with a company,” Benton-Hayes said. “In addition, employers will have to be more creative with compensation for retention purposes.”
Is the ban final, or will it face challenges?
The rule change is already facing pushback, which could halt its implementation. On Wednesday, the U.S. Chamber of Commerce and other business groups sued the FTC in federal court in the Eastern District of Texas. They are asking the court to issue an injunction to prevent the rule from taking effect, arguing that the FTC’s decision “breaks with centuries of state and federal law and rests on novel claims of authority by the Commission,” according to the lawsuit.
Whether the FTC has the authority to make this rule “is going to be the central point of challenge,” according to Rahbar. That lawsuit and future challenges will probably hinge on whether the agency can legally force such a broad change on an issue Congress did not direct the regulator to take up, he said.
“Over the past few years, there have been significant challenges to administrative agencies and the scope of their powers to make rules and regulations in areas where Congress hasn’t instructed them to do so,” Rahbar said. “Traditionally, there’s been a lot of deference to agency rulemaking authority.”
Gregory Brown, a commercial litigation lawyer with Hill Ward Henderson, said the rule creates a landscape of uncertainty for employers and employees, given how broad the language is and how the FTC is exercising its power.
“There will be direct challenges to this rule, constitutional challenges and some challenges about the FTC’s authority,” Brown said. “I think chaos ensues from here.”
(4/24/2024 5:50 PM, Staff)
Is there anything that Federal Trade Commission Chair Lina Khan doesn’t think she can do? Apparently not. On Tuesday she and her fellow Democratic commissioners effectively invalidated tens of millions of employment contracts without authority from Congress.
The FTC’s 570-page rule outlaws so-called non-compete agreements across the economy. Employers use these agreements to restrict workers from joining competitors or starting their own firms for a specified duration after leaving. They protect an employer’s intellectual property and investment in worker development.
The FTC says such agreements “restrict the freedom of American workers and suppress wages” and “stifle new businesses and new ideas.” Disregarding reams of evidence to the contrary, the agency bars employers from enforcing existing non-compete agreements for workers who aren’t “senior executives.”
Its rule also forbids employers from entering future non-compete agreements with “senior executives” in a “policy-making position” who earn more than $151,164 a year. By the FTC’s estimate, some 30 million workers are currently covered by non-compete agreements, which will now be rendered void.
Non-compete agreements may frustrate some workers, but they are rarely iron-clad. Employers usually are willing to negotiate less restrictive covenants to protect their trade secrets and training investments. They also usually offer more pay and perks in exchange for workers agreeing to a non-compete.
According to a U.S. Chamber of Commerce survey, 78% of responding employers said they provide additional compensation that spans the duration of an agreement or longer. Employers will pay workers less, and invest less in them, if workers can easily take the skills they acquire on the job elsewhere.
The FTC says innovation and businesses haven’t suffered in such states as California, North Dakota and Oklahoma where non-compete agreements are generally unenforceable. “California, for example, is home to four of the world’s ten largest companies by market capitalization,” the FTC says. Yes, and this may not be a coincidence.
Without non-compete agreements, Big Tech companies in California can poach talent from startups by offering them higher pay and stock options. Ms. Khan’s rule will help deep-pocketed businesses while harming smaller ones. The FTC says companies can instead use lawsuits to protect trade secrets, but this ignores that it’s hard to safeguard employee know-how.
Consider the brawl between the Orange County, Calif., tech startup Masimo and Apple. Masimo has alleged in federal court and the International Trade Commission that Apple poached its executives who helped the Cupertino company copy its pulse oximeter technology. U.S. courts could soon be flooded with such intellectual property disputes.
Some states are considering legislation to limit non-competes for lower-paid workers. This may increase labor mobility, but it could also make it harder for businesses to retain workers. State and local lawmakers can better balance such tradeoffs for their constituents than can bureaucrats in Washington.
Congress could also restrict non-compete agreements, but it hasn’t. The FTC claims authority to do so under Section 5 of the Federal Trade Commission Act, which authorizes the agency to prevent “unfair methods of competition.” Ms. Khan claims the commission can define “unfair” however it wishes.
As the Chamber and Business Roundtable explain in a lawsuit challenging the FTC rule, Section 5 prohibits “only practices that cause actual harm to competition and are not outweighed by procompetitive justifications.” They add that “the Commission has not claimed the authority to make rules regarding ‘unfair methods of competition’ for the last half century.”
The lawsuit cites the Supreme Court’s major-questions doctrine, which says administrative agencies must have express authorization from Congress for significant rules.
Ms. Khan disagrees. Her rule notes that “where Congress wished to limit the scope of the Commission’s authority over particular entities or activities, it did so expressly, demonstrating its intent to give the Commission broad enforcement authority over activities in or affecting commerce outside the scope of the enumerated exceptions.”
So unless Congress tells the FTC it can’t do something, it can do it. Got that, judges?
Is there anything that Federal Trade Commission Chair Lina Khan doesn’t think she can do? Apparently not. On Tuesday she and her fellow Democratic commissioners effectively invalidated tens of millions of employment contracts without authority from Congress.
The FTC’s 570-page rule outlaws so-called non-compete agreements across the economy. Employers use these agreements to restrict workers from joining competitors or starting their own firms for a specified duration after leaving. They protect an employer’s intellectual property and investment in worker development.
The FTC says such agreements “restrict the freedom of American workers and suppress wages” and “stifle new businesses and new ideas.” Disregarding reams of evidence to the contrary, the agency bars employers from enforcing existing non-compete agreements for workers who aren’t “senior executives.”
Its rule also forbids employers from entering future non-compete agreements with “senior executives” in a “policy-making position” who earn more than $151,164 a year. By the FTC’s estimate, some 30 million workers are currently covered by non-compete agreements, which will now be rendered void.
Non-compete agreements may frustrate some workers, but they are rarely iron-clad. Employers usually are willing to negotiate less restrictive covenants to protect their trade secrets and training investments. They also usually offer more pay and perks in exchange for workers agreeing to a non-compete.
According to a U.S. Chamber of Commerce survey, 78% of responding employers said they provide additional compensation that spans the duration of an agreement or longer. Employers will pay workers less, and invest less in them, if workers can easily take the skills they acquire on the job elsewhere.
The FTC says innovation and businesses haven’t suffered in such states as California, North Dakota and Oklahoma where non-compete agreements are generally unenforceable. “California, for example, is home to four of the world’s ten largest companies by market capitalization,” the FTC says. Yes, and this may not be a coincidence.
Without non-compete agreements, Big Tech companies in California can poach talent from startups by offering them higher pay and stock options. Ms. Khan’s rule will help deep-pocketed businesses while harming smaller ones. The FTC says companies can instead use lawsuits to protect trade secrets, but this ignores that it’s hard to safeguard employee know-how.
Consider the brawl between the Orange County, Calif., tech startup Masimo and Apple. Masimo has alleged in federal court and the International Trade Commission that Apple poached its executives who helped the Cupertino company copy its pulse oximeter technology. U.S. courts could soon be flooded with such intellectual property disputes.
Some states are considering legislation to limit non-competes for lower-paid workers. This may increase labor mobility, but it could also make it harder for businesses to retain workers. State and local lawmakers can better balance such tradeoffs for their constituents than can bureaucrats in Washington.
Congress could also restrict non-compete agreements, but it hasn’t. The FTC claims authority to do so under Section 5 of the Federal Trade Commission Act, which authorizes the agency to prevent “unfair methods of competition.” Ms. Khan claims the commission can define “unfair” however it wishes.
As the Chamber and Business Roundtable explain in a lawsuit challenging the FTC rule, Section 5 prohibits “only practices that cause actual harm to competition and are not outweighed by procompetitive justifications.” They add that “the Commission has not claimed the authority to make rules regarding ‘unfair methods of competition’ for the last half century.”
The lawsuit cites the Supreme Court’s major-questions doctrine, which says administrative agencies must have express authorization from Congress for significant rules.
Ms. Khan disagrees. Her rule notes that “where Congress wished to limit the scope of the Commission’s authority over particular entities or activities, it did so expressly, demonstrating its intent to give the Commission broad enforcement authority over activities in or affecting commerce outside the scope of the enumerated exceptions.”
So unless Congress tells the FTC it can’t do something, it can do it. Got that, judges?
(4/25/2024 12:03 AM, Lindsay Ellis and Chip Cutter)
Millions of workers will have more freedom over where they work should a recent Federal Trade Commission ban on nearly all noncompete agreements take effect.
In interviews with The Wall Street Journal, workers largely cheered the new rule. They say they are already thinking about ways a ban on noncompetes could help them and others change jobs and earn more.
Many major employers, on the other hand, are fighting the decision with a challenge in federal court filed by the U.S. Chamber of Commerce and backed by the Business Roundtable, which represents chief executive officers of some of the country’s biggest employers. Some employers are also preparing to change the way they train and pay their workers.
The ban is set to go into effect at the end of August, but could be delayed or struck down by lawsuits.
The new rules shift the balance of power between U.S. workers and their bosses yet again, following years of workplace clashes over remote work and pay, as well as a wave of resignations and layoffs. Employees say noncompetes have kept them tied to bad bosses or unreasonably limited their career mobility. Businesses say they need noncompetes to protect trade secrets and other confidential information, including customer lists and financial data.
Noncompete clauses in employment contracts have proliferated in recent years. They prohibit people across industries and pay grades—from fast-food workers to medical doctors—from easily moving to other employers or starting new ventures of their own.
Under the new FTC ruling, noncompete agreements will become unenforceable, with exceptions for many senior executives in a policymaking position.
“Everybody from the janitor on up is signing a noncompete, and it’s just gotten out of control,” said Robert Williams, 57, who works in sales in the flooring industry.
A noncompete agreement almost stopped Williams from getting a sales management job in Connecticut. His new employer, he said, ultimately did extend an offer after talking to his former employer and coming to an agreement.
“It created a lot of stress for me and my family,” Williams said, adding that he has been blocked from hiring top talent because of noncompetes they had signed.
California case study
The FTC’s ban on noncompete agreements would throw a uniform layer over the patchwork of state laws. Five states—California, Minnesota, Colorado, North Dakota and Oklahoma—have already banned all or nearly all noncompetes, according to Mercer, a benefits consulting firm.
Several other states have put restrictions on noncompetes, such as allowing them only for employees who earn over a certain pay threshold. Maryland, for instance, prohibits noncompetes for workers who earn less than or equal to $15 an hour.
One push behind partial bans on noncompetes has been to allow lower-wage workers, such hair stylists, to switch jobs if they can make more money elsewhere.
Noncompete clauses have been effectively unenforceable in California for decades, freeing workers to jump to rivals and allowing companies to poach talent at will. Many leaders in the tech sector have attributed much of the success of Silicon Valley to talent that’s unfettered by noncompetes.
Many Massachusetts tech workers, and some employers, have long cited the state’s enforcement of noncompetes as one reason the Greater Boston area often loses employees and startups to Silicon Valley—none bigger than Meta. (Mark Zuckerberg started Facebook while a student at Harvard in 2004.)
‘You’re kind of stuck’
Noncompetes have diverted the career paths of lower-level workers and executives, too.
After her employer was acquired by manufacturing firm 3M in 2019, Christine Grogan lost her job as a marketing leader. Her two-year noncompete agreement that she’d signed years prior blocked her from accepting other offers, she said.
The time without work took a financial toll. Grogan patched together consulting assignments, refinanced her San Antonio home and borrowed money from her mother-in-law, while her husband took on work as a handyman.
“I’ve done all this education, I’ve worked hard, and I couldn’t find a job because of a noncompete,” she said, adding that turning 50, and the uncertain job market in the early days of the pandemic, made her search for work even harder.
Eventually, Grogan took a job with another noncompete agreement in St. Louis. Though she didn’t want to be locked into another similar contract, she felt pressure to make money.
When Matthew Truocchio completed his medical residency, he sought work as an anesthesiologist on Long Island, N.Y. But a major employer there would require him to sign a two-year noncompete within a 25-mile radius, he said. That meant if he needed to change jobs, he would have to move out of the New York metro area.
“If you signed with a place that you don’t like, you’re kind of stuck,” said Truocchio, now 35. “I would never sign a noncompete clause bigger than 5 miles, because that limits you.”
Ultimately, Truocchio followed his wife to Tucson, Ariz., where he took a job with a small medical practice that didn’t have a noncompete, a key draw. The trade-off: his pay rate was lower. Truocchio said he filled in the gap by working upward of 70 hours each week.
Legal fights and retention bonuses
At Winton Machine, a roughly 40-person manufacturer based outside of Atlanta, Chief Executive Lisa Winton said she asks her salespeople and senior engineers to sign one-year noncompetes. Those employees have access to confidential information on industrial processes and receive a lot of on-the-job training, so Winton doesn’t want them to be able to quit and immediately take that knowledge to a rival.
“These are big, huge investments we’re making as a small company,” she said. “It’d be very hard for somebody to give you two weeks’ notice and to go directly to a competitor.”
Winton doesn’t have a direct competitor located nearby, but in the remote-work era, it is also easier for an engineer or salesperson to join one several states away.
If the ban on noncompetes remains, Winton expects to be more guarded with how she shares information and data internally: “I would hope it gets struck down.”
The ban on noncompetes doesn’t stop companies from using other techniques, including pay raises and retention bonuses, to retain employees or protect trade secrets, employment lawyers say.
Even if the noncompete ban survives legal challenges, confidentiality agreements remain enforceable, as do laws meant to safeguard intellectual property, said Ian Carleton Schaefer, a partner in the labor and employment practice group of Sheppard Mullin in New York.
To keep workers, companies may resort to retention bonuses or compensation tied to longevity. Unlike noncompetes, cash incentives don’t prohibit workers from going elsewhere. They make it up to employees to decide whether they want to forgo income to take a new job.
“That’s still perfectly permissible as a strategy,” Schaefer said. “It makes someone analyze, from an economic perspective, is it worth it to stay or go?”
David Fritz, an entertainment lawyer and co-founder of Creative Intell, an educational platform for the music business, said that noncompetes are particularly important for small businesses because employees often wear many hats and are exposed to all parts of the operation. The agreements should be permitted for employees who deal with the development and transfer of knowledge, he said.
“How do you stop them from taking the knowledge of what doesn’t work, going to a competitor and saying, ‘Don’t try that.’ “
Millions of workers will have more freedom over where they work should a recent Federal Trade Commission ban on nearly all noncompete agreements take effect.
In interviews with The Wall Street Journal, workers largely cheered the new rule. They say they are already thinking about ways a ban on noncompetes could help them and others change jobs and earn more.
Many major employers, on the other hand, are fighting the decision with a challenge in federal court filed by the U.S. Chamber of Commerce and backed by the Business Roundtable, which represents chief executive officers of some of the country’s biggest employers. Some employers are also preparing to change the way they train and pay their workers.
The ban is set to go into effect at the end of August, but could be delayed or struck down by lawsuits.
The new rules shift the balance of power between U.S. workers and their bosses yet again, following years of workplace clashes over remote work and pay, as well as a wave of resignations and layoffs. Employees say noncompetes have kept them tied to bad bosses or unreasonably limited their career mobility. Businesses say they need noncompetes to protect trade secrets and other confidential information, including customer lists and financial data.
Noncompete clauses in employment contracts have proliferated in recent years. They prohibit people across industries and pay grades—from fast-food workers to medical doctors—from easily moving to other employers or starting new ventures of their own.
Under the new FTC ruling, noncompete agreements will become unenforceable, with exceptions for many senior executives in a policymaking position.
“Everybody from the janitor on up is signing a noncompete, and it’s just gotten out of control,” said Robert Williams, 57, who works in sales in the flooring industry.
A noncompete agreement almost stopped Williams from getting a sales management job in Connecticut. His new employer, he said, ultimately did extend an offer after talking to his former employer and coming to an agreement.
“It created a lot of stress for me and my family,” Williams said, adding that he has been blocked from hiring top talent because of noncompetes they had signed.
California case study
The FTC’s ban on noncompete agreements would throw a uniform layer over the patchwork of state laws. Five states—California, Minnesota, Colorado, North Dakota and Oklahoma—have already banned all or nearly all noncompetes, according to Mercer, a benefits consulting firm.
Several other states have put restrictions on noncompetes, such as allowing them only for employees who earn over a certain pay threshold. Maryland, for instance, prohibits noncompetes for workers who earn less than or equal to $15 an hour.
One push behind partial bans on noncompetes has been to allow lower-wage workers, such hair stylists, to switch jobs if they can make more money elsewhere.
Noncompete clauses have been effectively unenforceable in California for decades, freeing workers to jump to rivals and allowing companies to poach talent at will. Many leaders in the tech sector have attributed much of the success of Silicon Valley to talent that’s unfettered by noncompetes.
Many Massachusetts tech workers, and some employers, have long cited the state’s enforcement of noncompetes as one reason the Greater Boston area often loses employees and startups to Silicon Valley—none bigger than Meta. (Mark Zuckerberg started Facebook while a student at Harvard in 2004.)
‘You’re kind of stuck’
Noncompetes have diverted the career paths of lower-level workers and executives, too.
After her employer was acquired by manufacturing firm 3M in 2019, Christine Grogan lost her job as a marketing leader. Her two-year noncompete agreement that she’d signed years prior blocked her from accepting other offers, she said.
The time without work took a financial toll. Grogan patched together consulting assignments, refinanced her San Antonio home and borrowed money from her mother-in-law, while her husband took on work as a handyman.
“I’ve done all this education, I’ve worked hard, and I couldn’t find a job because of a noncompete,” she said, adding that turning 50, and the uncertain job market in the early days of the pandemic, made her search for work even harder.
Eventually, Grogan took a job with another noncompete agreement in St. Louis. Though she didn’t want to be locked into another similar contract, she felt pressure to make money.
When Matthew Truocchio completed his medical residency, he sought work as an anesthesiologist on Long Island, N.Y. But a major employer there would require him to sign a two-year noncompete within a 25-mile radius, he said. That meant if he needed to change jobs, he would have to move out of the New York metro area.
“If you signed with a place that you don’t like, you’re kind of stuck,” said Truocchio, now 35. “I would never sign a noncompete clause bigger than 5 miles, because that limits you.”
Ultimately, Truocchio followed his wife to Tucson, Ariz., where he took a job with a small medical practice that didn’t have a noncompete, a key draw. The trade-off: his pay rate was lower. Truocchio said he filled in the gap by working upward of 70 hours each week.
Legal fights and retention bonuses
At Winton Machine, a roughly 40-person manufacturer based outside of Atlanta, Chief Executive Lisa Winton said she asks her salespeople and senior engineers to sign one-year noncompetes. Those employees have access to confidential information on industrial processes and receive a lot of on-the-job training, so Winton doesn’t want them to be able to quit and immediately take that knowledge to a rival.
“These are big, huge investments we’re making as a small company,” she said. “It’d be very hard for somebody to give you two weeks’ notice and to go directly to a competitor.”
Winton doesn’t have a direct competitor located nearby, but in the remote-work era, it is also easier for an engineer or salesperson to join one several states away.
If the ban on noncompetes remains, Winton expects to be more guarded with how she shares information and data internally: “I would hope it gets struck down.”
The ban on noncompetes doesn’t stop companies from using other techniques, including pay raises and retention bonuses, to retain employees or protect trade secrets, employment lawyers say.
Even if the noncompete ban survives legal challenges, confidentiality agreements remain enforceable, as do laws meant to safeguard intellectual property, said Ian Carleton Schaefer, a partner in the labor and employment practice group of Sheppard Mullin in New York.
To keep workers, companies may resort to retention bonuses or compensation tied to longevity. Unlike noncompetes, cash incentives don’t prohibit workers from going elsewhere. They make it up to employees to decide whether they want to forgo income to take a new job.
“That’s still perfectly permissible as a strategy,” Schaefer said. “It makes someone analyze, from an economic perspective, is it worth it to stay or go?”
David Fritz, an entertainment lawyer and co-founder of Creative Intell, an educational platform for the music business, said that noncompetes are particularly important for small businesses because employees often wear many hats and are exposed to all parts of the operation. The agreements should be permitted for employees who deal with the development and transfer of knowledge, he said.
“How do you stop them from taking the knowledge of what doesn’t work, going to a competitor and saying, ‘Don’t try that.’ “
(4/24/2024 5:48 PM, Jessica Karl)
I didn’t know what Jimmy John’s was before going to college in Indiana, but once I got my hands on a Turkey Tom in 2013, I never looked back. Not because their sandwiches were amazing (they’re pretty mid, in all honesty), but because of the speed of the delivery drivers. No matter where or what time you ordered — the dorm at 2 a.m. or a football tailgate at noon — your food got to you freaky fast, as the chain purports. Almost, like, too fast: Once I ordered a sandwich to my friend’s house and it arrived within two minutes. I was half-convinced the guy who handed it to me made it in the back of his Honda Civic.
That delivery driver lore was, to me, the company’s “secret sauce.” But looking back, the workers’ blazing speed probably had a lot to do with hustling to keep their jobs after the chain had forced them to sign this intense noncompete agreement:
Employee covenants and agrees that, during his or her employment with the Employer and for a period of two (2) years after … he or she will not have any direct or indirect interest in or perform services for … any business which derives more than ten percent (10%) of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches and which is located within three (3) miles of either [the Jimmy John’s location in question] or any such other Jimmy John’s Sandwich Shop.
There are thousands of Jimmy John’s in this country. Preventing former employees from slinging salami within a three-mile radius of every store feels criminal! Which is probably why the chain agreed to stop requiring noncompetes in 2016. And now, thanks to Lina Khan, every sandwich artist, chef, brewer or veterinarian who’s ever had to sign one can breathe a sigh of relief. With the Federal Trade Commission’s near-total ban on the provisions that prohibit workers from switching jobs within an industry, Betsey Stevenson says “the bargaining power shifts from employers to workers: Employers must make more competitive counteroffers to retain talent.”
Also: It was never about sandwich art! Noncompetes have always been an intimidation tactic, which is why lots of states have rules against them. But unless you have, like, a lawyer friend to tell you that you don’t need to sign the paperwork, you’re gonna do it.
Although the Chamber of Commerce vowed to immediately challenge the FTC’s ruling in court, Betsey argues that the ban is a victory for the American economy. “The US needs a competitive economy to stay strong in the global marketplace. And that requires workers who are able to take their skills where they are most valued — and new businesses that have access to the full talent of the US labor force,” she writes.
Of course, this might not be a victory for everyone. Matt Levine says the vests on Wall Street are bugging out about the potential loss of their garden leave. High-income workers in the financial industry have grown accustomed to the occasional perk of a year-long vacation. “In the financial industry, there is a common norm that if you leave a job you are not allowed to work for a competitor for some period of months or years, during which you are still paid by your old employer,” he writes, noting that “there are probably some people who structure their financial careers around maximizing gardening leave.” Did the FTC nix that? Matt says no, probably not. But the FTC’s official stance is a bit murky.
The likely outcome, according to Matt? “Getting rid of noncompetes will probably mean that firms have to rely more on NDAs, which will mean more messy disputes.” And you know what more legal drama means: more late-night Jimmy John’s orders from your lawyer friend!
The Great Googler Rebellion
While we’re on the subject of keeping employees happy, let’s talk about Google! For a while there, Alphabet was THE place to work. They had massage therapists on site. Fitness centers and exercise classes to stay healthy. Free lunches, available via numerous cafes and restaurants on campus. But CEO Sundar Pichai is officially over the company’s touchy-feely approach to employee satisfaction.
For most of his tenure, he’s been a “peacetime CEO,” says Dave Lee, but “Pichai’s recent memo to workers, sent amid the latest round of discontent at the company — this time over the company’s $1.2 billion contract (shared with Amazon.com Inc.) to provide cloud services to Israel,” represents a stark departure. “The company did not hesitate to force out the unruly,” Dave writes; more than 50 Googlers were fired this week for protesting the deal at the company’s offices. On the bright side, at least they won’t have to worry about violating noncompetes?
I didn’t know what Jimmy John’s was before going to college in Indiana, but once I got my hands on a Turkey Tom in 2013, I never looked back. Not because their sandwiches were amazing (they’re pretty mid, in all honesty), but because of the speed of the delivery drivers. No matter where or what time you ordered — the dorm at 2 a.m. or a football tailgate at noon — your food got to you freaky fast, as the chain purports. Almost, like, too fast: Once I ordered a sandwich to my friend’s house and it arrived within two minutes. I was half-convinced the guy who handed it to me made it in the back of his Honda Civic.
That delivery driver lore was, to me, the company’s “secret sauce.” But looking back, the workers’ blazing speed probably had a lot to do with hustling to keep their jobs after the chain had forced them to sign this intense noncompete agreement:
Employee covenants and agrees that, during his or her employment with the Employer and for a period of two (2) years after … he or she will not have any direct or indirect interest in or perform services for … any business which derives more than ten percent (10%) of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches and which is located within three (3) miles of either [the Jimmy John’s location in question] or any such other Jimmy John’s Sandwich Shop.
There are thousands of Jimmy John’s in this country. Preventing former employees from slinging salami within a three-mile radius of every store feels criminal! Which is probably why the chain agreed to stop requiring noncompetes in 2016. And now, thanks to Lina Khan, every sandwich artist, chef, brewer or veterinarian who’s ever had to sign one can breathe a sigh of relief. With the Federal Trade Commission’s near-total ban on the provisions that prohibit workers from switching jobs within an industry, Betsey Stevenson says “the bargaining power shifts from employers to workers: Employers must make more competitive counteroffers to retain talent.”
Also: It was never about sandwich art! Noncompetes have always been an intimidation tactic, which is why lots of states have rules against them. But unless you have, like, a lawyer friend to tell you that you don’t need to sign the paperwork, you’re gonna do it.
Although the Chamber of Commerce vowed to immediately challenge the FTC’s ruling in court, Betsey argues that the ban is a victory for the American economy. “The US needs a competitive economy to stay strong in the global marketplace. And that requires workers who are able to take their skills where they are most valued — and new businesses that have access to the full talent of the US labor force,” she writes.
Of course, this might not be a victory for everyone. Matt Levine says the vests on Wall Street are bugging out about the potential loss of their garden leave. High-income workers in the financial industry have grown accustomed to the occasional perk of a year-long vacation. “In the financial industry, there is a common norm that if you leave a job you are not allowed to work for a competitor for some period of months or years, during which you are still paid by your old employer,” he writes, noting that “there are probably some people who structure their financial careers around maximizing gardening leave.” Did the FTC nix that? Matt says no, probably not. But the FTC’s official stance is a bit murky.
The likely outcome, according to Matt? “Getting rid of noncompetes will probably mean that firms have to rely more on NDAs, which will mean more messy disputes.” And you know what more legal drama means: more late-night Jimmy John’s orders from your lawyer friend!
The Great Googler Rebellion
While we’re on the subject of keeping employees happy, let’s talk about Google! For a while there, Alphabet was THE place to work. They had massage therapists on site. Fitness centers and exercise classes to stay healthy. Free lunches, available via numerous cafes and restaurants on campus. But CEO Sundar Pichai is officially over the company’s touchy-feely approach to employee satisfaction.
For most of his tenure, he’s been a “peacetime CEO,” says Dave Lee, but “Pichai’s recent memo to workers, sent amid the latest round of discontent at the company — this time over the company’s $1.2 billion contract (shared with Amazon.com Inc.) to provide cloud services to Israel,” represents a stark departure. “The company did not hesitate to force out the unruly,” Dave writes; more than 50 Googlers were fired this week for protesting the deal at the company’s offices. On the bright side, at least they won’t have to worry about violating noncompetes?
(4/24/2024 10:31 AM, Betsey Stevenson)
It’s easy to understand why the US Chamber of Commerce is so upset about the Federal Trade Commission’s decision to ban noncompete agreements. The problem for businesses is not that they will lose trade secrets or valuable investments in workers to competitors. It’s that they just lost bargaining power to workers — and that’s exactly what the FTC intended.
Despite the common perception that noncompete agreements are relevant only for employees who possess critical trade secrets, the reality is that they are often imposed across various industries on a wide spectrum of workers, many of whom do not handle any sensitive information. It’s also the case that most hiring in the US involves people leaving one job for another — which is a critical factor shaping the dynamism of the labor market.
To see why noncompetes matter, it’s important to understand the value of the right to quit one job and take another. The question is, who should hold that right?
When parties can negotiate without cost and rights are clearly defined, noted the Nobel laureate Ronald Coase more than half a century ago, they will reach agreements that lead to economically efficient outcomes. With the FTC’s ban, the bargaining power shifts from employers to workers: Employers must make more competitive counteroffers to retain talent.
Previously, if you were governed by a noncompete agreement, you theoretically could pay your employer to let you out of it. Now, according to Coase’s theory, even though the number of workers switching jobs might not change, the ban will have a distributional effect: Workers hold more bargaining power, and therefore could end up with higher wages.
Some might ask: Wouldn’t workers simply have negotiated higher wages to compensate them for signing noncompete agreements in the first place? If this is true, then a ban on noncompetes would have little effect on wages. The evidence, however, suggests that most workers do not do this type of forward-looking negotiation. In fact, many workers sign noncompete agreements without realizing that they are not legally enforceable in their state.
Workers often face significant challenges in negotiating terms, especially when they lack information about their options and the job market. The process of understanding and negotiating over noncompete agreements can be particularly daunting without legal assistance, leading to a negotiation that is cheaper for — and therefore favors — employers.
Moreover, noncompete clauses exploit behavioral biases that lead workers to underestimate their future cost. Some workers may even be ready to start a new job when the noncompete agreement is shown to them. In the comments received by the FTC, many workers noted that they weren’t aware of such clauses until the last minute.
These arguments imply that banning noncompetes might be important not just for higher wages, but for greater labor competition as workers become more mobile and make more employment transitions. Research suggests that noncompete agreements can restrict economic activity and personal career growth. And it’s not just labor market competition that is reduced. By restricting labor supply, existing businesses can prevent new competitors from entering their markets and driving down prices for consumers.
Supporters of noncompetes argue that they are necessary to protect business secrets and justify investments in employee training. But existing laws already protect confidential information. And businesses can adopt alternative strategies such as training repayment agreements, which are more directly tied to the specific investments made in employees. Finally, Coase’s work shows that there is no difference in these outcomes if the payments are made to retain workers, as businesses can offer to pay workers not to take jobs with competitors.
The FTC’s ban on noncompete agreements will help enhance labor market efficiency and economic growth. The US needs a competitive economy to stay strong in the global marketplace. And that requires workers who are able to take their skills where they are most valued — and new businesses that have access to the full talent of the US labor force.
In most other advanced economies, workers have rights to keep a job. The US does not require employers to give reasons for terminating workers, provide performance improvement plans before terminating workers and, when terminating a worker, a sufficient paid notice period.
The argument against those policies is that they would make it hard for the US to have a dynamic labor market. But the same logic applies to noncompete agreements: If it should be easy for employers to fire workers, then it should also be easy for employees to quit. And that requires workers to have the right to take a better job. By allowing workers to move freely to roles where they are most valued, the FTC is fostering a competitive and fair labor market.
It’s easy to understand why the US Chamber of Commerce is so upset about the Federal Trade Commission’s decision to ban noncompete agreements. The problem for businesses is not that they will lose trade secrets or valuable investments in workers to competitors. It’s that they just lost bargaining power to workers — and that’s exactly what the FTC intended.
Despite the common perception that noncompete agreements are relevant only for employees who possess critical trade secrets, the reality is that they are often imposed across various industries on a wide spectrum of workers, many of whom do not handle any sensitive information. It’s also the case that most hiring in the US involves people leaving one job for another — which is a critical factor shaping the dynamism of the labor market.
To see why noncompetes matter, it’s important to understand the value of the right to quit one job and take another. The question is, who should hold that right?
When parties can negotiate without cost and rights are clearly defined, noted the Nobel laureate Ronald Coase more than half a century ago, they will reach agreements that lead to economically efficient outcomes. With the FTC’s ban, the bargaining power shifts from employers to workers: Employers must make more competitive counteroffers to retain talent.
Previously, if you were governed by a noncompete agreement, you theoretically could pay your employer to let you out of it. Now, according to Coase’s theory, even though the number of workers switching jobs might not change, the ban will have a distributional effect: Workers hold more bargaining power, and therefore could end up with higher wages.
Some might ask: Wouldn’t workers simply have negotiated higher wages to compensate them for signing noncompete agreements in the first place? If this is true, then a ban on noncompetes would have little effect on wages. The evidence, however, suggests that most workers do not do this type of forward-looking negotiation. In fact, many workers sign noncompete agreements without realizing that they are not legally enforceable in their state.
Workers often face significant challenges in negotiating terms, especially when they lack information about their options and the job market. The process of understanding and negotiating over noncompete agreements can be particularly daunting without legal assistance, leading to a negotiation that is cheaper for — and therefore favors — employers.
Moreover, noncompete clauses exploit behavioral biases that lead workers to underestimate their future cost. Some workers may even be ready to start a new job when the noncompete agreement is shown to them. In the comments received by the FTC, many workers noted that they weren’t aware of such clauses until the last minute.
These arguments imply that banning noncompetes might be important not just for higher wages, but for greater labor competition as workers become more mobile and make more employment transitions. Research suggests that noncompete agreements can restrict economic activity and personal career growth. And it’s not just labor market competition that is reduced. By restricting labor supply, existing businesses can prevent new competitors from entering their markets and driving down prices for consumers.
Supporters of noncompetes argue that they are necessary to protect business secrets and justify investments in employee training. But existing laws already protect confidential information. And businesses can adopt alternative strategies such as training repayment agreements, which are more directly tied to the specific investments made in employees. Finally, Coase’s work shows that there is no difference in these outcomes if the payments are made to retain workers, as businesses can offer to pay workers not to take jobs with competitors.
The FTC’s ban on noncompete agreements will help enhance labor market efficiency and economic growth. The US needs a competitive economy to stay strong in the global marketplace. And that requires workers who are able to take their skills where they are most valued — and new businesses that have access to the full talent of the US labor force.
In most other advanced economies, workers have rights to keep a job. The US does not require employers to give reasons for terminating workers, provide performance improvement plans before terminating workers and, when terminating a worker, a sufficient paid notice period.
The argument against those policies is that they would make it hard for the US to have a dynamic labor market. But the same logic applies to noncompete agreements: If it should be easy for employers to fire workers, then it should also be easy for employees to quit. And that requires workers to have the right to take a better job. By allowing workers to move freely to roles where they are most valued, the FTC is fostering a competitive and fair labor market.
(4/24/2024 2:29 PM, Andrew Keshner)
(4/24/2024 4:59 PM, Kate Gibson)
(4/24/2024 6:34 PM, Matt Marx)
(4/24/2024 8:04 AM, Staff)
(4/24/2024 6:35 AM, Staff)
(4/24/2024 6:00 AM, F. Vincent Vernuccio)
(4/24/2024 7:46 PM, Robert S. Teachout)
(4/24/2024 2:22 PM, Daniel Wiessner)
(4/24/2024 4:54 PM, Zachary Folks)
Family and Medical Leave
(4/24/2024 6:00 PM, Hudson Kamphausen)
Retirement
(4/24/2024 3:34 PM, Fatima Hussein)
(4/24/2024 5:06 PM, Jessica Hall)
(4/24/2024 3:00 PM, Nancy J. Altman and James W. Russell)
(4/24/2024 3:06 PM, Brian Menickella)
(4/24/2024 11:16 AM, Kristen Beckman)
(4/24/2024 8:41 AM, Lucy Peterson)
(4/24/2024 12:15 PM, Allison Bell)
Trade
(4/24/2024 1:00 PM, Evan Halper)
Several of the biggest American solar manufacturing companies are demanding aggressive action against cheap imports, arguing in a petition filed Wednesday with the Commerce Department that firms in four Asian countries are illegally flooding the U.S. market with Chinese-subsidized panels.
Though the panels are not produced in China, the petitioners allege many are made in factories linked to Chinese-based companies that benefit from massive price supports.
The complaint comes amid a glut of solar panels on the global market that has driven prices down by 50 percent over the past year, with the International Energy Agency projecting prices will fall even further. Manufacturers are currently making two solar panels for every one that is getting installed, according to the IEA. The oversupply is imperiling a boom in U.S. manufacturing driven by President Biden’s signature climate bill, the Inflation Reduction Act.
“We are seeking to enforce the rules, remedy the injury to our domestic solar industry and signal that the U.S. will not be a dumping ground for foreign solar products,” said Tim Brightbill, an attorney for the American Alliance for Solar Manufacturing Trade Committee, the group of U.S. firms that filed the petition. The group includes such industry giants as Ohio-based First Solar and Qcells, which has used Inflation Reduction Act subsidies to invest in huge new manufacturing facilities in Georgia.
But the petition is renewing tensions in the American solar industry, as installers of panels and developers of large solar farms warn that placing restrictions on imports could hurt consumers and raise prices. If the petitioners succeed, companies that buy solar panels from businesses in any of the four nations cited could be subject to steep penalties, which federal trade officials could enforce retroactively.
The industry only recently emerged from a bruising battle over the enforcement of trade laws, after the administration found Chinese companies were illegally sidestepping them by producing panels in China but then finishing assembly in other countries to avoid tariffs.
After industry groups warned strict enforcement of those trade laws could cripple growth, the administration agreed to waive penalties for two years. Enforcement is set to begin again in June. Now, American manufacturers say Chinese companies have shifted their strategy, building plants in Cambodia, Malaysia, Vietnam and Thailand with big subsidies from a Chinese government eager to maintain dominance over the global solar market. Those four countries accounted for 84 percent of the solar panels imported into the United States in the last quarter of 2023, according to the petitioners.
Their petition was immediately opposed by major clean energy groups in the United States that represent the full spectrum of companies in the industry, and not just manufacturers.
“Today’s filing creates market uncertainty in the U.S. solar industry and poses a potential threat to the build-out of a domestic solar supply chain,” said a statement from a coalition that includes the Solar Energy Industries Association and the American Clean Power Association.
“America’s clean energy industry is urging the Biden administration to consider alternative solutions to address the petitioners’ concerns so that we can uplift American manufacturers and maintain a thriving clean energy economy across the value chain.” The groups warn disruptions in the market could undermine the administration’s climate goals.
The backlog of solar panels stockpiled in U.S. warehouses is so large that it could fulfill a year and a half of demand, according to the IEA. The manufacturing firms that filed the petition say imports of panels into the United States last year exceeded installations by more than 25 gigawatts — roughly the amount of power produced by 25 large nuclear plants.
The glut comes after billions of dollars in new U.S. tax incentives triggered a solar manufacturing boom in this country. The incentives were meant to muscle solar production away from China and back to the United States. They have led to the ground breaking of new plants and a resurgence in solar cell production, a key part of the industry that had been almost entirely ceded to China and other countries.
But the solar market has also been going through growing pains unrelated to geopolitics. Rooftop solar installations collapsed in California after the state passed new rules cutting the subsidies for homeowners who generate power with them. The change came amid worries that lower-income utility ratepayers who could not afford solar panels would shoulder too much of the cost of the rooftop installations.
At a Senate hearing last month, Mark Widmar, CEO of First Solar, one of the companies that signed onto the petition filed Wednesday, warned lawmakers that “the U.S. solar manufacturing industry remains in a precarious position, despite the passage of the IRA.”
“Market conditions show no sign of slowing imports to the U.S. unless there are policy and trade law enforcement changes,” he said. “The relentlessness of the Chinese subsidization and dumping strategy has caused a significant collapse in cell and module pricing and threatens the viability of many manufacturers who may never be able to get off the ground or have the ability to finance the start-up or growth of their operations.”
Earlier this year, a company called CubicPV, which had backing from Bill Gates, scrapped its plan to build a factory that would make solar wafers — a key component in the panels — citing rapidly sinking prices in the market.
The Commerce Department now must decide within 20 days whether to launch the trade investigation requested in the petition, according to U.S. trade rules. Should an investigation happen, it is a long process, according to the groups that filed the petition, probably stretching into 2025 before there is full resolution. But the administration would be required to make a preliminary determination within the next couple of months on the issue of whether trade rules were likely to have been violated and American companies were harmed.
As the case moves through the process, tensions within the U.S. solar industry are certain to flare.
“This case is bad news for clean energy jobs and American solar manufacturing,” said a statement from Kevin G. Hostetler, CEO of Array Technologies, which provides solar farm developers and operators systems that track and maximize efficiency of their panels. “More duties will only cause uncertainty and unnecessary project delays, holding the U.S. back in meeting our clean energy deployment and manufacturing goals.”
Several of the biggest American solar manufacturing companies are demanding aggressive action against cheap imports, arguing in a petition filed Wednesday with the Commerce Department that firms in four Asian countries are illegally flooding the U.S. market with Chinese-subsidized panels.
Though the panels are not produced in China, the petitioners allege many are made in factories linked to Chinese-based companies that benefit from massive price supports.
The complaint comes amid a glut of solar panels on the global market that has driven prices down by 50 percent over the past year, with the International Energy Agency projecting prices will fall even further. Manufacturers are currently making two solar panels for every one that is getting installed, according to the IEA. The oversupply is imperiling a boom in U.S. manufacturing driven by President Biden’s signature climate bill, the Inflation Reduction Act.
“We are seeking to enforce the rules, remedy the injury to our domestic solar industry and signal that the U.S. will not be a dumping ground for foreign solar products,” said Tim Brightbill, an attorney for the American Alliance for Solar Manufacturing Trade Committee, the group of U.S. firms that filed the petition. The group includes such industry giants as Ohio-based First Solar and Qcells, which has used Inflation Reduction Act subsidies to invest in huge new manufacturing facilities in Georgia.
But the petition is renewing tensions in the American solar industry, as installers of panels and developers of large solar farms warn that placing restrictions on imports could hurt consumers and raise prices. If the petitioners succeed, companies that buy solar panels from businesses in any of the four nations cited could be subject to steep penalties, which federal trade officials could enforce retroactively.
The industry only recently emerged from a bruising battle over the enforcement of trade laws, after the administration found Chinese companies were illegally sidestepping them by producing panels in China but then finishing assembly in other countries to avoid tariffs.
After industry groups warned strict enforcement of those trade laws could cripple growth, the administration agreed to waive penalties for two years. Enforcement is set to begin again in June. Now, American manufacturers say Chinese companies have shifted their strategy, building plants in Cambodia, Malaysia, Vietnam and Thailand with big subsidies from a Chinese government eager to maintain dominance over the global solar market. Those four countries accounted for 84 percent of the solar panels imported into the United States in the last quarter of 2023, according to the petitioners.
Their petition was immediately opposed by major clean energy groups in the United States that represent the full spectrum of companies in the industry, and not just manufacturers.
“Today’s filing creates market uncertainty in the U.S. solar industry and poses a potential threat to the build-out of a domestic solar supply chain,” said a statement from a coalition that includes the Solar Energy Industries Association and the American Clean Power Association.
“America’s clean energy industry is urging the Biden administration to consider alternative solutions to address the petitioners’ concerns so that we can uplift American manufacturers and maintain a thriving clean energy economy across the value chain.” The groups warn disruptions in the market could undermine the administration’s climate goals.
The backlog of solar panels stockpiled in U.S. warehouses is so large that it could fulfill a year and a half of demand, according to the IEA. The manufacturing firms that filed the petition say imports of panels into the United States last year exceeded installations by more than 25 gigawatts — roughly the amount of power produced by 25 large nuclear plants.
The glut comes after billions of dollars in new U.S. tax incentives triggered a solar manufacturing boom in this country. The incentives were meant to muscle solar production away from China and back to the United States. They have led to the ground breaking of new plants and a resurgence in solar cell production, a key part of the industry that had been almost entirely ceded to China and other countries.
But the solar market has also been going through growing pains unrelated to geopolitics. Rooftop solar installations collapsed in California after the state passed new rules cutting the subsidies for homeowners who generate power with them. The change came amid worries that lower-income utility ratepayers who could not afford solar panels would shoulder too much of the cost of the rooftop installations.
At a Senate hearing last month, Mark Widmar, CEO of First Solar, one of the companies that signed onto the petition filed Wednesday, warned lawmakers that “the U.S. solar manufacturing industry remains in a precarious position, despite the passage of the IRA.”
“Market conditions show no sign of slowing imports to the U.S. unless there are policy and trade law enforcement changes,” he said. “The relentlessness of the Chinese subsidization and dumping strategy has caused a significant collapse in cell and module pricing and threatens the viability of many manufacturers who may never be able to get off the ground or have the ability to finance the start-up or growth of their operations.”
Earlier this year, a company called CubicPV, which had backing from Bill Gates, scrapped its plan to build a factory that would make solar wafers — a key component in the panels — citing rapidly sinking prices in the market.
The Commerce Department now must decide within 20 days whether to launch the trade investigation requested in the petition, according to U.S. trade rules. Should an investigation happen, it is a long process, according to the groups that filed the petition, probably stretching into 2025 before there is full resolution. But the administration would be required to make a preliminary determination within the next couple of months on the issue of whether trade rules were likely to have been violated and American companies were harmed.
As the case moves through the process, tensions within the U.S. solar industry are certain to flare.
“This case is bad news for clean energy jobs and American solar manufacturing,” said a statement from Kevin G. Hostetler, CEO of Array Technologies, which provides solar farm developers and operators systems that track and maximize efficiency of their panels. “More duties will only cause uncertainty and unnecessary project delays, holding the U.S. back in meeting our clean energy deployment and manufacturing goals.”
National
(4/24/2024 7:41 AM, Damian J. Troise)
(4/25/2024 12:01 AM, Paul Wiseman)
(4/25/2024 12:06 AM, Lucia Mutikani)
(4/25/2024 5:06 AM, Andrea Shalal)
(4/24/2024 6:02 AM, Rick Barrett)
{End of Report}
{End of Report}