Last week, the Federal Trade Commission revealed what it meant when it vowed to be more than an antitrust and consumer protection agency. It announced a proposal to regulate virtually every labor and service relationship in the United States and make it more lucrative for people to quit.
The new rule is predicted to boost wages and salaries for millions of Americans at every income level, with CEOs getting some of the largest raises. According to the FTC’s analysis, the rule is likely to reduce on-the-job training, shorten job tenure, and generate more resignations. It might also spur litigation if employees spill trade secrets in their new posts.
In measures both simple and sweeping, the rule would ban certain terms of service and regulate others. Categorically banned would be non-compete clauses (or NCCs) in agreements between companies and workers or contractors. Any agreement that prevents a person from quitting a job and working for a competitor or starting a competing business would be illegal, no matter how important it might be to protect trade secrets and competitive strategies of the employer.
Potentially prohibited would be non-disclosure, non-solicitation, and non-recruitment agreements. These would be deemed functional NCCs if they effectively preclude someone from quitting a job and joining a competitor. Agreements requiring workers to pay employers for training would also be deemed functional NCCs if the payments not reasonably related to the cost of the training prevent workers from quitting.