Employers across a wide variety of industries include non-compete clauses in their employment agreements. This practice has come under increasing fire in recent years. The latest being a petition filed by the AFL-CIO, Service Employees International Union, and a number of other labor and public interest groups with the U.S. Federal Trade Commission (FTC) calling for the FTC to its rulemaking power to issue a federal rule banning the use of non-compete agreements nationwide.
According to the petition, it is estimated that one out of every five U.S. workers — or about 30 million — is bound by a non-compete agreement. The petition seeks implementation of a new rule prohibiting employers across all industries from requiring workers sign agreements limiting their ability to work for a competitor. The petition does not distinguish between employees and independent contractors but calls for a ban on the use of non-compete agreements for both types of workers. According to these groups, non-compete agreements suppress the ability for employees to negotiate for raises, escape from undesirable work environments, or taking their experience and putting it to work by starting competing businesses of their own. If the FTC, which has a mandate to enforce antitrust and consumer protection laws, issues a rule banning non-compete agreements as is being requested, it would make companies that violate the rule subject to FTC enforcement and could cause such companies to incur liability.
The petition calls out by name companies such as Amazon, which the petition claims required temporary warehouse workers to agree to broad non-compete clauses and fast-food chain Jimmy John’s, which, prior to its 2016 settlement with the Illinois Attorney General, the petition claims restricted new hires from working for any competing restaurant within three miles.
The use of restrictive covenants (e.g. covenants not to compete, non-solicitation agreements, etc.) and other so-called anti-competitive practices by employers have become an increasing focus for labor advocates and public officials, including state attorneys general who have filed an increasing number of suits against fast food franchises and other employers who hire large numbers of low wage workers seeking to end the use of non-compete provisions. Silicon Valley heavy-hitters including Apple, Google, Adobe, and Intel agreed in 2015 to a $415 million settlement to end claims that they conspired together to implement an anti-poaching policy to avoid stealing one another’s employees. The FTC has come under pressure from lawmakers and consumer groups to join these labor groups and attorneys general in by taking a more aggressive approach to antitrust enforcement.
Proponents of non-compete agreements argue that they are necessary to prevent unfair competition and to protect the employer’s investment in its employees. Companies invest resources in employees through training and ongoing education in order to maximize the productivity and effectiveness of their employees. The longer a worker works for an employer, the more likely that worker will gain access to the critical and commercially sensitive information the employer uses to in its operations. Using a non-compete agreement to compel the worker’s secrecy, proponents argue, is an effective way of protecting such information.
Stay tuned for updates on the FTC’s reaction to this petition and other non-compete agreement news. Whether you are a business owner who is or is considering asking workers to sign non-compete or non-solicitation agreements or a worker being asked to sign such an agreement, it is always advisable to seek the assistance of an attorney experienced in non-compete law. The Chicago non-compete agreement attorneys at Lubin Austermuehle have over thirty years of experience defending and prosecuting non-compete agreements and unpaid wages and a wide variety of other business dispute lawsuits arising between physicians in the same medical practice. Lubin Austermuehle a firm of Chicago business dispute attorneys handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat.
Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex class action, copyright, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes. Our Naperville and Hinsdale business dispute and restrictive covenant lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago, Cook, and DuPage County area businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0333 or our toll-free number (833) 306-4933. You can also contact us online here.