Woodsman, Fell That Tree!

[Passages]

A court rejects the claim of a tree-cutting company that an FTC ban on noncompetes violates its right to keep its former employees from going out on their own.

BY HAROLD MEYERSON JULY 29, 2024

One of the most far-reaching and beneficial-to-actual-existing-Americans rulings of the Federal Trade Commission is its ban on noncompete agreements. Those agreements, commonly slipped into employment contracts, ban employees from going to work for a competitor in the same field or same region, or from starting up their own business in that field, for a specified amount of time after leaving their employer. They generally stipulate that such departed employees must pay that employer a substantial amount of money if they violate that ban.

The ostensible purpose of such noncompetes is to protect companies’ trade secrets. However, they now cover roughly 20 percent of American workers according to the FTC (and well more than that according to a survey by the Economic Policy Institute), which means that countless barbershops, hardware stores, pet-walking services, and sundry mom-and-pops must be harboring trade secrets as vigilantly as the CIA (where leaking is subject to draconian punishment and yet still happens, but I digress).

The FTC’s ruling is set to take effect on September 4, but that appears to depend on what part of the country you live in. Earlier this month, a U.S. district court judge in Texas (where all regulations go to die) granted a preliminary injunction against the FTC ruling in a case brought by the U.S. Chamber of Commerce, among others. That judge promised a final decision by August. Last week, however, another U.S. district court judge, this one in Pennsylvania, denied a company’s request for a preliminary injunction, saying that the rule would likely pass muster when she delivered her final decision, as the company had not produced evidence that it would suffer irreparable harm if the noncompete ban took effect. As the Texas injunction applies only to the particular litigant, however, the expected nullification of the FTC rule will only affect the Chamber itself. Given these opposing rulings, these cases will likely wend their ways up the judicial chain until they probably reach the Supremes

SNIP
More likely, I admit, the company’s case was probably that they trained their workers to cut down trees and didn’t want them to go into business for themselves once they learned the skill. But these are precisely the kind of skills that have been passed down in countless occupations and cultures without restricting their spread. Imagine what would have happened if 18th- and 19th-century Americans, both real and legendary, had been stopped from building log cabins and rail fences because some primordial tree-cutting monopoly with a helluva noncompete clause and expensive lawyers had stood in their way. (For that matter, the American Industrial Revolution was sparked in part by a Brit who immigrated to the U.S. carrying several key textile technologies with him.)

https://prospect.org/labor/2024-07-29-woodsman-fell-that-tree-ftc-noncompetes/