The troubled History Behind Non-Compete laws in America
Large corporations join the U.S. Chamber of commerce in fighting against the ban
WASHINGTON (Gray DC) - The Federal Trade Commission is working to ban noncompete contracts across the U.S.
The FTC says noncompetes contracts stunt economic growth and put a ceiling on the future of American workers.
“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism,” said FTC Chair Lina M. Khan in a statement.
President Joe Biden sides with the FTC on this, issuing a nationwide ban employers making their workers sign noncompete agreements.
However, several businesses are challenging this in court, including the U.S. Chamber of Commerce – which is in the process of suing the FTC for this move.
A recent statement from the U.S. Chamber of Commerce read:
“The Federal Trade Commission’s decision to ban noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive. Since its inception -- over 100 years ago, The FTC has never granted the constitutional and statutory authority to write its own competitive rules.”
The inception of the law is where legal experts like Mathew Leffler come in.
“The root to noncompete laws is tied to the institution of slavery and that’s what predicated the south,” said Leffler.
After the civil war, Leffler said, most slaves were freed and able to earn an income for their work. However, historians say their former slave owners didn’t want them working for other plantations, which is where legal experts say noncompete laws originated in America.
“You can’t go live in the same place and work for someone who’s different than me - you have to work for me,” said Leffler. “And, if you leave, if you don’t want to work for me, you’re going to have to move. And so we see this influx of people moving to different cities, different states, to an extent to escape the pervasiveness of what the South was like post-Civil War, but also because they were not legally allowed to work anywhere else.”
Leffler said he agrees noncompete agreements should be banned, but the current legal battles surrounding this motion may make it more difficult.
There are several businesses joining the U.S. Chamber of Commerce in suing the FTC. Republican Commissioner Andrew Ferguson says the FTC does not have the power to nullify millions of contracts.
The decision may eventually head to the Supreme Court.
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