IT Staffing Report: May 4, 2023

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Attorneys general from 17 states and DC back noncompete ban in letter to FTC

A group of attorneys general from 17 states and the District of Columbia signed a letter in support of the Federal Trade Commission’s proposed new rule to ban noncompete clauses in employment contracts.

“Post-employment restrictions like these have an adverse effect on workers, especially low-wage workers and those who are part of the gig economy and tend to change jobs often,” Michigan Attorney General Dana Nessel said.

The letter was sent on April 19 to Lina Khan, chair of the FTC. The effort was led by California, New Jersey and the District of Columbia.

Noncompetes are agreements that prohibit employees from working for a competitor company after leaving their current employment for a specified amount of time and within a specified geography. The proposed new rule has raised concerns from some in the staffing industry, and it would apply to employees as well as independent contractors.

The letter said the rule will significantly benefit workers, especially low- and middle-wage workers. It also cited research indicating that bans on noncompetes have resulted in gains in wages and job mobility, and they argued the proposed rule would promote gender and racial equality and increase entrepreneurship, especially among women. The attorneys general argued that research has shown the women in states with higher noncompete enforceability are less likely than men to leave their jobs and start rival ventures. Noncompetes, in general, restrict entrepreneurship and startup activity, they argued.

In addition, the letter said ending noncompetes will improve conditions in the healthcare industry, which is becoming increasingly concentrated with fewer employers in the US. They noted noncompetes are widely used in the healthcare industry and restrict the re-entry of healthcare workers into the employment market, which inflates prices and decreases wages.

Currently, enforcement of noncompetes varies by state. The attorneys general signing the letter represent both states that do and do not enforce noncompete agreements. The letter said 18% of the labor force was bound by noncompetes in 2014, and 38% had agreed to one in the past.

“Employees deserve to move to new jobs or start their own businesses as their careers develop,” said Matthew Platkin, New Jersey attorney general. “The proposed national rule would allow for greater competition and fairness in the marketplace as businesses will have to find better ways to keep talented workers than the yoke of a noncompete clause.”

Attorneys general from the following states and areas signed the letter: California, Colorado, Delaware, the District of Columbia, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island and Washington.