FTC bans noncompete agreements

FTC bans non-compete clauses

The Federal Trade Commission (FTC) issued a new rule banning non-compete clauses for most workers in the US, and some local workers say that could benefit consumers, too.

SEATTLE - The Federal Trade Commission (FTC) issued a new rule banning non-compete clauses for most workers in the US, and some local workers say that could benefit consumers, too.

The agreements have long-stopped workers from jumping to jobs with better pay, or prohibited them from starting competing companies for a prescribed period of time.

In some cases, the clauses don't just harm workers, but clients as well.

"I was with Merrill Lynch and of course they didn’t want me to take clients away," said Jeff Janeway. "Not that I had much in the way of clients to take."

He says early on in his career, non-compete clauses were something he had to consider.

"When I investigated my leaving Merrill Lynch and starting up my own practice, it was a non-issue. I was told that it was almost impossible to enforce in Washington," said Janeway. "Somebody has to make a living somehow. As long as I didn’t steal clients, I was fine."

While he wasn't ultimately impacted, others aren't so lucky.

Jen, a mental health therapist who didn't want to be fully named, said that while she didn't have to sign one, she has seen the impact on other colleagues.

"I myself did not sign a non-compete. I know people who have. It really obstructs their way of living. It sometimes prevents them from taking really good job opportunities for the fear of what could happen if it doesn’t work out," said Jen.

Jen said that in the mental health field, the non-compete clauses can also prohibit clients from staying with their long-time therapists if they have to move on.

"The non-competes that I have seen in our field, in mental health, where you can’t tell clients where you are going. You can’t offer clients to go there. Our best hope is that our clients will find us," she said.

Jen says for those who value the trust they've built with a therapist, the situation can be nerve-wrecking.

"I know it’s probably nerve wrecking for them, to just have the idea, should something happen on either side of the parties and a job be terminated, they could be left without that support system that some people have had for many, many years."

Attorney Mark Lindquist of Mark Lindquist Law, Aviation and Personal Injury, says one of the main criticisms of the non-compete clauses was that they were also being over-used for lower-earning jobs in fields like retail and fast food.

"It wasn't just senior executives who were being asked to sign these clauses, but janitors and security guards," he said.

Despite the support for the new changes, he says a court challenge could also be on the horizon.

"Nobody should start ripping up their non-compete clause agreements yet, because this is going to be a court battle for a number of months, maybe even years. " said Lindquist. "Everyone on both sides expects the Chamber of Commerce to pose a legal challenge. The thrust of that challenge will be that the agency has overstepped."

Lindquist says one of the legal questions the courts may have to answer is, "Is this a matter for congress or a federal agency like the FTC?"

He says if a challenge occurs, the courts could issue an injunction that could remain in place until after a ruling is made.