The American Bar Association Section of Antitrust Law recently submitted comments to the Federal Trade Commission in connection with the January 2020 FTC workshop on “Non-Competes in the Workplace: Examining Antitrust and Consumer Protection Issues.” In section two of the submission, Lieff Cabraser partner Dean M. Harvey provided detailed commentary on the “Impact of Non-compete Clauses in Employment Agreements.”
Harvey explains that although non-compete agreements have a long history, in recent years their use in employment contracts has grown enormously as they are deployed in a variety of industries with respect to a variety of both skilled and unskilled workers and at all salary and wage levels. Designed to prevent employees from leaving for a competitor, non-compete agreements have the additional consequence of binding employees to one company, ultimately making it more difficult for them to get ahead.
According to a recent national survey, nearly half of private sector American businesses indicated that at least some employees were required to sign such agreements, and nearly a third indicated that all their employees were required to do so, regardless of their individual pay or job responsibilities. The Economic Policy Institute estimates that this means 28% to 46% of private sector workers (36 to 60 million American workers) are subject to non-compete agreements. These clauses, often hidden within employment contracts, give a company tremendous power over their employees as workers are often surprised to learn that by agreeing to a non-compete clause, they are signing away their right to leave a company for a competitor.
Harvey further notes that the ABA now acknowledges that labor markets are imperfectly competitive, and that nearly every employer has at least some market power over their employees’ in terms of wages and mobility regardless of the presence of alternative employers in some hypothetical external labor market. They go on to note that this power may increase with employer concentration, whether that be through collusion with other potential rival employers (i.e., “no poach agreements,” which illegally limit an employee’s pay and ability to move within different parts or franchisees of one company) or through the parallel deployment of non-compete agreements.
Read the full ABA Antitrust Law Section comments on Non-Compete Clauses in the Workplace.
About Dean Harvey
A partner in Lieff Cabraser’s San Francisco office, Dean Harvey represents individuals and companies in antitrust, business tort, employment, and intellectual property litigation. His cases seek to remedy and prevent wrongful conduct by dominant firms. These precedent-setting lawsuits concern a wide variety of industries and markets. Remedies include reimbursing purchasers who have overpaid for price-fixed products; preventing monopolists from stifling innovation and eliminating competition; and obtaining damages for businesses, inventors, and copyright owners.
Dean was a leader in the High-Tech Antitrust class action against Google, Apple, Intel and other tech giants for allegedly conspiring to suppress the mobility and compensation of their technical employees. This landmark case resulted in the largest recovery (by far) of any class action asserting antitrust claims in the employment context: $435 million. Dean continues the fight to ensure that employees receive competitive compensation, currently representing a doctor in a class action alleging an unlawful no-hire agreement between the medical schools of Duke University and the University of North Carolina.