Open Markets Institute Testifies in Support of Ohio Bill Banning Non-compete Clauses

Legal director Sandeep Vaheesan delivered testimony in support of SB 11, a bill that prohibits non-compete clauses for all workers. His testimony highlights the negative impact of non-competes and similar contractual provisions on workers and the labor market.

• Non-compete clauses harm workers: These contracts limit workers' flexibility, depress wages, and hinder small business formation. Even when unenforceable, they discourage workers from seeking better opportunities, with nearly 40% of workers in states where non-competes are unenforceable reporting that they’ve turned down job offers because of them.

• Weak justification for non-competes: Employers often claim that non-competes are necessary to protect business secrets. Vaheesan argues that other legal tools, like trade secret laws or non-solicitation agreements, are more effective and less restrictive. Non-competes also fail to prevent actual trade secret theft and are overbroad or poorly targeted.

• SB 11's scope: The bill goes beyond conventional non-competes, also targeting "training repayment agreements" (TRAPs) and liquidated damages provisions. These provisions financially penalize workers who leave a job, effectively locking them into unfavorable positions.

This testimony ultimately highlights that that SB 11 goes beyond banning non-compete clauses by also targeting related provisions like Training Repayment Agreements (TRAPs) and liquidated damages provisions. TRAPs force workers to repay training costs if they leave before a specified period, even when the training holds little value, while liquidated damages provisions impose financial penalties for leaving a job. Both practices effectively lock workers into unfavorable jobs, much like non-competes. Finally, Vaheesan speaks on the inclusion of anti-circumvention clauses in SB 11 to prevent employers from using alternative methods to bypass the law and continue exploiting workers with restrictive contracts.

A History of Advocacy Against Non-Compete Clauses:
Open Markets has been at the forefront of the fight against non-compete agreements:

• In 2019, Open Markets led a petition, joined by the AFL-CIO, SEIU, and other labor unions and public interest groups, urging the FTC to adopt a regulatory ban on non-compete clauses.

• Through sustained advocacy, Open Markets and its partners successfully pushed for the FTC’s historic rule prohibiting these restrictive agreements.

Why This Matters:
Non-compete clauses impact millions of American workers, limiting their ability to change jobs, negotiate higher wages, and pursue career advancement. By defending the FTC’s rule, Open Markets aims to protect workers' rights, foster fair competition, and prevent corporations from exploiting their market power at the expense of labor mobility and innovation.