Legal director Sandeep Vaheesan writes on the methods used by companies that spread beyond the utilization of noncompete clauses.

The Federal Trade Commission’s proposed ban on noncompete clauses is a worthy effort. Noncompetes restrict workers from switching jobs or starting their own businesses and affect as many as 60 million Americans in the private sector today. Unfortunately, the FTC’s proposal as drafted falls short, leaving employers options for unfairly impeding the mobility of workers.

The focus on noncompetes is understandable. In recent years, the use of noncompetes has become much more widespread. Employers say they help prevent workers from decamping to a competitor and taking proprietary knowledge with them. But there are other ways for firms to achieve this outcome: copyright, patent and trade-secret laws all provide targeted protection. In reality, many firms use noncompetes as a substitute for better means of retaining workers, such as good working conditions and higher wages. The FTC calculates that outlawing these contracts could raise workers’ pay by as much as $300 billion per year in the United States.

Restricting workers from leaving their jobs might be especially harmful to working people during periods of full employment. By all accounts, there are jobs to be filled. But workers can’t necessarily move to fill them. And, while in theory they could have said no to a noncompete or attempted to bargain over its terms, most workers do not try to negotiate such restrictions, likely because they believe negotiation is not an option, don’t want to create tension with their employer or fear losing a job offer altogether. In other cases, employers introduce restrictions after a worker has joined.

The FTC’s proposal to ban noncompetes follows years of state-level reform. Many states have curtailed their use. For instance, Washington state and D.C. prohibit noncompete clauses for employees making below $100,000 and $150,000 per year, respectively.

The problem is that as legislators and regulators have curtailed noncompetes, employers have found alternative means to restrict the movement of their staff.

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