“I doubt that three unelected technocrats somehow got on the right track to think about non-competitors and that all previous legal minds to investigate this issue are wrong,” she writes , as an unelected technocrat. The U.S. Chamber of Commerce calls the proposed change an “unlawful action” and claims that getting rid of non-competitors depress innovation. Why would a company bother to invest in innovation, or even train employees in specialized skills, when those ungrateful could walk that knowledge out the door?
Khan dryly notes that despite the state’s ban on non-competitors, California companies have managed to innovate quite well. You know… Apple, Disney, Google, the guy who invented the AeroPress. And she has a message for those companies that now face the scary prospect of losing those clauses if the FTC rule becomes official. “Ultimately, companies need to invest in employees if they want to be successful,” she says. “You retain talent by actually competing, offering them better wages, better benefits, better training and investment opportunities. This way you keep retention high instead of keeping employees in their place.”
As for the fear of employees stealing intellectual property, Khan says her rule won’t affect trade secret lawsuits, though she doesn’t want trade secret restrictions to be interpreted so broadly that they become a shadow form of non-competition.
While the non-compete agreement is still only in the proposal stage, Khan thinks her agency has made a pretty good case. “I mean it’s a 218 page line!” she says. “Nearly half of that is reviewing the empirical studies very, very carefully.” But she also encourages anyone with an opinion or relevant evidence to join in during the 60-day comment period that ends March 10, saying the agency will look at everything with an open mind. But with a 3-1 majority of Democratic commissioners, it’s fair to predict that the agency will get its reign in one form or another.
I ask Khan if she sees the rule as a natural experiment of her own, testing to see how much the FTC can get away with before the Supreme Court rebukes her. Last June, the court ruled that the EPA overstepped its bounds in regulating carbon emissions. Consistent with majority opinion, Judge Neil Gorsuch promoted a doctrine that agencies cannot make sweeping new rules unless Congress explicitly approves them.
Khan replies by referring to Congress’s original intent for the FTC to ensure competition. “It’s an authority that, especially in recent decades, hasn’t been used that much, and I think that’s a mockery,” she says. “We as enforcers have a duty to enforce the laws that Congress has placed on us. I think we have a pretty clear authority, a pretty clear precedent. If we face legal challenges, we are prepared to fully defend ourselves.”
Khan’s case against non-competition clauses is strong. But five and possibly six of the current Supreme Court justices are not accustomed to giving air kisses to labor, big or small. Instead, they seem to enjoy directing sputum at the faces of workers asserting their rights – or regulators seeking to expand those rights. If they overthrow Khan’s rule, she will have as little power to restore it as those Prudential guards trapped in their wretched jobs by non-compete clauses.
