Workplace rules: regulators are (still) trying to crack down on restrictive contracts

Hard to leave… In April, the FTC voted for a near-total ban on noncompete agreements — contracts that keep workers from being hired by rival companies. The rule also limited “stay or pay” clauses that lock in employees by requiring them to, for instance, repay thousands for their hiring and training costs before being allowed to quit.

• Womp: A federal judge knocked Biden’s ban down this month before it could go into effect, ruling that the FTC had overreached. The agency’s weighing an appeal.

Beyond Wall Street… While noncompetes get a rep for being mostly applied to bankers, professions ranging from hairdressing to nursing are often subject to them. The FTC said noncompetes affect nearly one in five Americans (or 30M), and that its legislation could raise workers’ earnings by $400B+ over the next decade. But biz groups argue that airtight contracts are necessary to protect confidential info and training costs.

• Tech biggies like Meta and SpaceX have been in the hot seat for tightening aspects of worker contracts, namely non-disparagement clauses in severance packages.

• Companies have used the clauses to keep employees from talking negatively about a company (no venting) but regulators said they aren’t legal.

Knock-on effect… While the FTC’s ban was blocked, states have passed (or are considering) their own rules limiting the scope of noncompetes. Still, experts say employers could tighten up other aspects of employee contracts, like nonsolicit agreements that keep ex-employees from recruiting their former coworkers.