AG Becerra Calls for Nationwide Ban on Non-Compete Agreements, Reminds Businesses of Existing Prohibition in California

SACRAMENTO November 17, 2019 –  California Attorney General Xavier Becerra joined a coalition of 19 attorneys general in urging the Federal Trade Commission (FTC) to protect workers by banning non-compete agreements in employment contracts nationwide. In a letter, the coalition urges the FTC to promulgate a regulation prohibiting the use of non-compete provisions, which can prevent employees from seeking better pay and benefits by going to work for a competitor. California law protects workers from non-compete provisions by making them unenforceable in employee contracts for businesses operating in the state. The Attorney General also used this opportunity to remind employers that non-compete provisions are unenforceable in California.

“Employers should compete for workers with wages, benefits, and quality of work, not with anticompetitive and one-sided provisions that prevent people from having access to better opportunities,” said Attorney General Becerra. “At a time when income inequality and wage stagnation pose a threat to our economic security, there is no excuse for employers who coerce their workers into staying on a job. Non-compete provisions distort our labor markets, limiting worker mobility and making it more difficult for businesses to recruit. Today, I’m calling on the FTC to stop companies from throwing sand in the gears of a robust labor market through these anticompetitive practices. For businesses operating in our state, let me make one thing clear: non-compete agreements are not enforceable here in California.”

Advertisement

Non-compete agreements harm workers and the economy by restraining labor markets. In total, approximately 60 million Americans, roughly two in every five people in the labor force, have worked under a non-compete provision. Non-compete provisions limit the ability of people across the labor market to seek better jobs, affecting anyone from software engineers and journalists to baristas and home healthcare workers. These anticompetitive provisions also harm the economy by depriving businesses of the opportunity to hire workers who may otherwise be available or qualified.

California law expressly prohibits employers, including those who operate out of state but employ Californians, from enforcing non-compete agreements. Even when unenforceable, these anticompetitive provisions can discourage workers from seeking new opportunities. Workers in a variety of professions may mistakenly believe that they cannot pursue or accept a competitor’s offer of better pay or working conditions without suffering legal repercussions. Many may believe that their only option is to continue to work for their current employer. Low-wage workers may be disproportionately affected because of limited access to employment law resources and financial insecurity that makes taking a perceived risk untenable.

Today’s letter supports a petition submitted to the FTC earlier this year by an alliance of labor unions, public interest groups, and legal advocates requesting that the FTC initiate a rulemaking effort to classify worker non-compete provisions as an unfair method of competition and illegal under the Federal Trade Commission Act.

Attorney General Becerra is committed to protecting the rights of workers throughout the state and across the country. In July, Attorney General Becerra urged the FTC to take a stand against non-compete agreements in response to a request for public comments around hearings on competition and consumer protection in the 21st century. Earlier this year, the California Department of Justice, as part of a multistate effort, entered into agreements with major fast food companies operating around the country prohibiting them from including no-poach provisions in their franchise contracts. That effort built on a multistate review of anticompetitive agreements used by fast food companies in their employment contracts. In September, Attorney General Becerra urged the U.S. Department of Labor to rescind a proposal undermining civil rights protections that prevent federal contractors from discriminating against employees. The Attorney General has also actively sought to tackle other anticompetitive practices and, among other actions, has led lawsuits against T-MobileSutter Health, and Valero to pr! otect consumers in the marketplace.

In submitting the letter, Attorney General Becerra joins the attorneys general of Minnesota, Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, New Mexico, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, Wisconsin, and the District of Columbia.

A copy of the letter is available here.