FTC proposes ban on non-compete clauses

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gounion
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FTC proposes ban on non-compete clauses

Post by gounion »

Via WaPo:
The Federal Trade Commission proposed a rule Thursday to prohibit employers from imposing noncompete clauses on workers — a widespread practice that economists say suppresses pay, prevents new companies from forming and raises consumer prices.

The ban would make it illegal for companies to enter into noncompete contracts with employees or continue to maintain such contracts if they already exist, and it would require that companies with active noncompete clauses inform workers that they are void. Such agreements typically prevent workers from getting jobs at a competitor of a current or former employer for a defined period.

The FTC estimates that banning noncompete contracts would open new job opportunities for 30 million Americans and raise wages by $300 billion a year. If enacted, the rule could send shock waves across a wide range of industries.

One widely cited survey of economists from 2014 found that close to 20 percent of workers in the United States are bound to noncompete clauses across a variety of jobs, from hairstylists to software engineers to nurses. These contracts have forced workers to take on loads of debt during lengthy job searches, locked workers out of their own professions or shunted them into lower-paying industries.

The proposed rule, recommended by President Biden as part of a 2021 executive order, is the FTC’s first big shot at stretching the boundaries of antitrust enforcement to empower American workers.

FTC Chair Lina Khan, a Biden appointee who has promised to “use all of the tools in our toolbox” to rein in anticompetitive behavior from companies, said the rule is being proposed because of “a raft of economic evidence” that now shows “the ways that noncompete clauses undermine competition.”

“Noncompetes are basically locking up workers, which means that they’re not able to match with the best jobs for them,” Khan said on a call with reporters Wednesday afternoon. “If this rule were to be finalized and go into effect … [it] would force employers to compete more vigorously over workers in ways that should lead to higher wages and improved working conditions, basically injecting competition into the labor market.”
Way to go Joe! Fairness in the workplace!
Glennfs
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Re: FTC proposes ban on non-compete clauses

Post by Glennfs »

Very bad idea but not surprised it comes from the anti business party.

Years ago I was leased to an LTL company that decided to open in Charlotte.

They hired 2 sales people from Roadway and had them poach their existing customers from Roadway.
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gounion
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

Glennfs wrote: Thu Jan 05, 2023 7:50 pm Very bad idea but not surprised it comes from the anti business party.

Years ago I was leased to an LTL company that decided to open in Charlotte.

They hired 2 sales people from Roadway and had them poach their existing customers from Roadway.
So people don’t have the right to leave a job they don’t like and take another job in your same line?

Funny, you’ve always been like “I can get another job as a trucker any time I want to.”

Would YOU take a job where they told you that you couldn’t go to work for someone else?
gounion
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

BTW, Glenn. That’s right. We liberals stand up for PEOPLE. For THEIR rights.

You conservatives stand up for the rich and corporations.

I’m proud and I always have been that I stand up for people who work in the employ of others, and companies that would crush those who labor for them. And I stand in good company.
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Re: FTC proposes ban on non-compete clauses

Post by Bludogdem »

Glennfs wrote: Thu Jan 05, 2023 7:50 pm Very bad idea but not surprised it comes from the anti business party.

Years ago I was leased to an LTL company that decided to open in Charlotte.

They hired 2 sales people from Roadway and had them poach their existing customers from Roadway.
There are a lot of non compete abuses. And there are legitimate reasons for non competes. It needs to be properly managed.

Here’s a good piece addressing covenants.

“ Non-compete clauses are an easy way to ensure that your employees can’t take your business to the competition, but are you using those non-compete clauses in a legally compliant way? Is there another restrictive covenant that your company can be using in place of a non-compete that still protects your intellectual property while limiting your risk of unenforceable, and potentially illegal, non-compete clauses? Emerging trends in non-compete law can help guide you in implementing the policies around restrictive covenants to protect your business.

Types of Restrictive Covenants
There are 3 primary types of restrictive covenants, and your company may be using one of these or a combination of all of them.

Non-compete: A contract where an employee agrees to not compete with a company for a certain period after employment ends. This prevents an employee from leaving your company to work for a direct competitor and taking your business or practices to your competitors.

Non-solicit: A contract where an employee agrees to solicit the company’s clients, employees, or other individuals with whom the employee worked. This prevents an employee from selling to your clients after they start a new job or taking other employees with them.

Non-disclosure (NDA): A contract where an employee agrees not to disclose the company’s confidential information. This prevents an employee from sharing your company’s business practices, sensitive information like finances, and intellectual property.

Additionally, restrictive covenants have limitations that impact the ways that you can apply them.

Legitimate business interests
You need to prove that your company has a legitimate business interest in using a restrictive covenant.

State law determines what qualifies as legitimate business interests, and this varies from state to state, but this can include trade secrets, customer relationships, or confidential information like business strategies or financial reports. Wanting to limit competition is not a legitimate business interest. The restrictive covenant cannot be so broad that it makes it difficult for the employee to find a new job. The burden falls on your company to prove that you do have a legitimate business interest in enforcing a restrictive covenant.”

https://www.sixfifty.com/blog/is-your-c ... s-legally/

The reasons have to be appropriate.
gounion
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

Bludogdem wrote: Thu Jan 05, 2023 9:17 pm There are a lot of non compete abuses. And there are legitimate reasons for non competes. It needs to be properly managed.

Here’s a good piece addressing covenants.

“ Non-compete clauses are an easy way to ensure that your employees can’t take your business to the competition, but are you using those non-compete clauses in a legally compliant way? Is there another restrictive covenant that your company can be using in place of a non-compete that still protects your intellectual property while limiting your risk of unenforceable, and potentially illegal, non-compete clauses? Emerging trends in non-compete law can help guide you in implementing the policies around restrictive covenants to protect your business.

Types of Restrictive Covenants
There are 3 primary types of restrictive covenants, and your company may be using one of these or a combination of all of them.

Non-compete: A contract where an employee agrees to not compete with a company for a certain period after employment ends. This prevents an employee from leaving your company to work for a direct competitor and taking your business or practices to your competitors.

Non-solicit: A contract where an employee agrees to solicit the company’s clients, employees, or other individuals with whom the employee worked. This prevents an employee from selling to your clients after they start a new job or taking other employees with them.

Non-disclosure (NDA): A contract where an employee agrees not to disclose the company’s confidential information. This prevents an employee from sharing your company’s business practices, sensitive information like finances, and intellectual property.

Additionally, restrictive covenants have limitations that impact the ways that you can apply them.

Legitimate business interests
You need to prove that your company has a legitimate business interest in using a restrictive covenant.

State law determines what qualifies as legitimate business interests, and this varies from state to state, but this can include trade secrets, customer relationships, or confidential information like business strategies or financial reports. Wanting to limit competition is not a legitimate business interest. The restrictive covenant cannot be so broad that it makes it difficult for the employee to find a new job. The burden falls on your company to prove that you do have a legitimate business interest in enforcing a restrictive covenant.”

https://www.sixfifty.com/blog/is-your-c ... s-legally/

The reasons have to be appropriate.
Donald Trump has proven NDAs are abused way too often and need to be outlawed. And when Jimmy John’s sub shops make employees sign non-compete, so they can’t work in competing food restaurants, it’s time to ban those too.
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Number6
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Re: FTC proposes ban on non-compete clauses

Post by Number6 »

Glennfs wrote: Thu Jan 05, 2023 7:50 pm Very bad idea but not surprised it comes from the anti business party.

Years ago I was leased to an LTL company that decided to open in Charlotte.

They hired 2 sales people from Roadway and had them poach their existing customers from Roadway.
As you said, they "poached" which may or not be legal based upon which state you're in but that's not the same as non-compete clauses.
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Number6
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Re: FTC proposes ban on non-compete clauses

Post by Number6 »

gounion wrote: Thu Jan 05, 2023 3:52 pm Via WaPo:



Way to go Joe! Fairness in the workplace!
I'm wavering between being for or against it. I can see valid arguments on both sides and I think non-compete clauses need to be permitted in some instances. For example, if company A is developing a new widget that will make them millions and the person who developed it goes to work at company B and gives them the information to bring it to the market before company A can the that should be prevented.

If a beauty shop stylist decides to leave the shop she's working at to open her own business she shouldn't be prevented by having a non-compete clause preventing her from doing so.

This new ban needs to be worked to prevent it from hurting people and to prevent potential harm to companies.
Last edited by Number6 on Fri Jan 06, 2023 12:23 pm, edited 1 time in total.
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gounion
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

Number6 wrote: Fri Jan 06, 2023 12:17 am I'm wavering between being for or against it. I can see valid arguments on both sides and I think non-compete clauses need to be permitted in some instances. For example, if company A is developing a new widget that will make them millions and the person who developed it goes to work at company B and gives them the information to bring it to the market before company A can the that should be prevented.

If a beauty shop stylist decides to leave the shop she's working at to open her own business she should be prevented by having a non-compete clause preventing her from doing so.

This new ban needs to be worked to prevent it from hurting people and to prevent potential harm to companies.
I would always err on the side of worker freedom. In your first example, there are ways company A could legally protect it's intellectual property, such as patents.

In your second example, to me, it's a no-brainer. Of course a stylist should be able to either put their skills on the open market for an employer who pays better, or they are welcome to open a competing business in a free market.
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Re: FTC proposes ban on non-compete clauses

Post by bird »

Non-compete clauses are very touchy. If there is a new technology or process being developed by a company and an employee involved in that development wants to leave then there is some basis for a non-compete.

In the case of sales? No. A non-compete should not exist. There is an old saying that people by from people. If a company loses a customer because the salesperson working with that customer goes to a competitor perhaps the first company should ask themselves why they couldn’t keep that customer or that employee. Customers are the market. If, as businesspeople claim, the market decides then the market should be allowed to decide. All of which underscores that “the market” is a term of art and what actually happens is transactions between humans.

On a related note, patents are restraint of trade. Jefferson at first opposed them until he changed his mind.
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

I'm thinking that Six erred in his post, and meant to say "she SHOULDN'T be prevented..."
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Re: FTC proposes ban on non-compete clauses

Post by Number6 »

gounion wrote: Fri Jan 06, 2023 7:57 am I'm thinking that Six erred in his post, and meant to say "she SHOULDN'T be prevented..."
Thanks for catching my error. I fixed it and put it in bold.
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Re: FTC proposes ban on non-compete clauses

Post by Number6 »

gounion wrote: Fri Jan 06, 2023 7:36 am I would always err on the side of worker freedom. In your first example, there are ways company A could legally protect it's intellectual property, such as patents.
But if a company hasn't developed the widget or process then can it get a patent on something that doesn't exist? I think agreements prohibiting employees from using their previous company's proprietary/intellectual property is reasonable.
In your second example, to me, it's a no-brainer. Of course a stylist should be able to either put their skills on the open market for an employer who pays better, or they are welcome to open a competing business in a free market.
I don't think employees should be prohibited from working for a competing companies. I do think though, if a company A trains an individual in a particular job with the expectation of the employee working for them for reasonable amount of time to recover training costs should be able to require the employee who leaves for an identical job in company B to pay part of company A's training cost.

Case in point, the bowling centers at San Diego Navy bases would send employees to the company who makes the pinsetters to learn how to operate, maintain, and repair them. A couple months after training, these employees would quit and work at a civilian bowling center where they made more money. IMO, the Navy should be reimbursed for part of the costs they spent for training the employee.
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Re: FTC proposes ban on non-compete clauses

Post by Bludogdem »

Number6 wrote: Fri Jan 06, 2023 12:39 pm But if a company hasn't developed the widget or process then can it get a patent on something that doesn't exist? I think agreements prohibiting employees from using their previous company's proprietary/intellectual property is reasonable.


I don't think employees should be prohibited from working for a competing companies. I do think though, if a company A trains an individual in a particular job with the expectation of the employee working for them for reasonable amount of time to recover training costs should be able to require the employee who leaves for an identical job in company B to pay part of company A's training cost.

Case in point, the bowling centers at San Diego Navy bases would send employees to the company who makes the pinsetters to learn how to operate, maintain, and repair them. A couple months after training, these employees would quit and work at a civilian bowling center where they made more money. IMO, the Navy should be reimbursed for part of the costs they spent for training the employee.
There are patents for lots of things never existed.
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Re: FTC proposes ban on non-compete clauses

Post by Number6 »

Bludogdem wrote: Fri Jan 06, 2023 1:23 pm There are patents for lots of things never existed.
Like what?

So you're saying I can get a patent for a time machine or a Star Trek-like transporter?
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Re: FTC proposes ban on non-compete clauses

Post by Bludogdem »

Number6 wrote: Fri Jan 06, 2023 1:40 pm Like what?

So you're saying I can get a patent for a time machine or a Star Trek-like transporter?
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

Number6 wrote: Fri Jan 06, 2023 12:39 pm But if a company hasn't developed the widget or process then can it get a patent on something that doesn't exist? I think agreements prohibiting employees from using their previous company's proprietary/intellectual property is reasonable.
But not a forced agreement that they can't work for another company in the same sector. I could see an agreement that they couldn't use knowledge of a certain product.

But not that you're trapped in a job and can't leave to a similar job elsewhere.
I don't think employees should be prohibited from working for a competing companies. I do think though, if a company A trains an individual in a particular job with the expectation of the employee working for them for reasonable amount of time to recover training costs should be able to require the employee who leaves for an identical job in company B to pay part of company A's training cost.

Case in point, the bowling centers at San Diego Navy bases would send employees to the company who makes the pinsetters to learn how to operate, maintain, and repair them. A couple months after training, these employees would quit and work at a civilian bowling center where they made more money. IMO, the Navy should be reimbursed for part of the costs they spent for training the employee.
As far as training, oh, I could see a company charging someone tens of thousands of dollars, even in your example. Easy to abuse by a company.

HOWEVER, I did go to work for a major aerospace company as a toolmaker back in the eighties. I was given moving expenses, hotel expenses and per diem. If I didn't make the 60 day probation and was fired, I would owe the money, so that was a bit worrysome, but I was a damned good toolmaker, so I wasn't really worried. There was no problems at all.

Second part of the contract was I had to stay one year, or I had to repay the costs incurred. Of course, that was also easy. This was their normal offer for professional hires who had to move to take the job. When I was hired, they interviewed everyone being laid off (by seniority), and the high performers like myself were offered the professional deal. The others they offered a job if they wanted to show up, no expenses.

I enjoyed it there and they were quite happy with me. It was a good place, very high tech and I learned quite a bit. HOWEVER, I had gotten a divorce in the meantime and had a new girlfriend back home. So I quit one day after one year, and moved back home and went to work for another aerospace company.

That's reasonable. But to tell a toolmaker they can't quit and go to another company wouldn't be something I'd ever accept.

And it SURE AS HELL isn't reasonable to tell a Jimmy Johns employee who has an entry-level job making sub sandwiches that they can't work at a competitor is nothing but an abuse, and I think the practice should be banned.
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Re: FTC proposes ban on non-compete clauses

Post by Number6 »

gounion wrote: Fri Jan 06, 2023 2:55 pm But not a forced agreement that they can't work for another company in the same sector. I could see an agreement that they couldn't use knowledge of a certain product.

But not that you're trapped in a job and can't leave to a similar job elsewhere.
Where a company has proprietary information/property then it would be reasonable for the departing employee to be prohibited from using or transferring that proprietary information/property to their new employer or to anyone else until that proprietary information/property becomes non-proprietary.
As far as training, oh, I could see a company charging someone tens of thousands of dollars, even in your example. Easy to abuse by a company.
I agree but it could also be abused by an employee getting training at the expense of that company and then goes to work for a company that doesn't provide that training.
HOWEVER, I did go to work for a major aerospace company as a toolmaker back in the eighties. I was given moving expenses, hotel expenses and per diem. If I didn't make the 60 day probation and was fired, I would owe the money, so that was a bit worrysome, but I was a damned good toolmaker, so I wasn't really worried. There was no problems at all.

Second part of the contract was I had to stay one year, or I had to repay the costs incurred. Of course, that was also easy. This was their normal offer for professional hires who had to move to take the job. When I was hired, they interviewed everyone being laid off (by seniority), and the high performers like myself were offered the professional deal. The others they offered a job if they wanted to show up, no expenses.

I enjoyed it there and they were quite happy with me. It was a good place, very high tech and I learned quite a bit. HOWEVER, I had gotten a divorce in the meantime and had a new girlfriend back home. So I quit one day after one year, and moved back home and went to work for another aerospace company.

That's reasonable. But to tell a toolmaker they can't quit and go to another company wouldn't be something I'd ever accept.
If a person, such as a toolmaker, has the skilled they learned before they worked for the company then yes, they should be able to go work for another company when they choose to.

When I arrived at Cannon AFB, NM, in 1988, as part of our in-briefing to the area was a delegation from the town of Clovis telling us about how glad they are that we're here. The police chief gave a pitch that if anyone is retiring or looking to separate wants to become a police officer the city will send the to the police academy in Albuquerque. He went on to say they have a problem attracting and keeping officers because a year after they attend the academy and are on the job in Clovis they quit and go to work in Albuquerque or Santa Fe where the pay is higher. So basically what Clovis was doing was paying for the training of police officers for other cities and not getting much of a return on their investment.
And it SURE AS HELL isn't reasonable to tell a Jimmy Johns employee who has an entry-level job making sub sandwiches that they can't work at a competitor is nothing but an abuse, and I think the practice should be banned.
The sad fact is there are some fast food companies who actually do that, which is wrong.
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

Number6 wrote: Fri Jan 06, 2023 3:55 pm Where a company has proprietary information/property then it would be reasonable for the departing employee to be prohibited from using or transferring that proprietary information/property to their new employer or to anyone else until that proprietary information/property becomes non-proprietary.
I can see there being some sort of contractual control for that slim possible situation.
I agree but it could also be abused by an employee getting training at the expense of that company and then goes to work for a company that doesn't provide that training.
I would posit that the obvious fix for that is competitive wages.
If a person, such as a toolmaker, has the skilled they learned before they worked for the company then yes, they should be able to go work for another company when they choose to.
My skill was learned in training at my original company. Some trainees would wash out or get fired, whether they hired in for the training or transferred in out of the shop, like I was. And, if there was a layoff, they were the first to go, forget about the cost of training.

And the training wouldn't get you a job as a toolmaker. You had to have 3 years experience, or no one would look at you. At all. I was laid off twice before my three years was up, and there were no jobs available, period. After three years, you could choose between lots of offers.
When I arrived at Cannon AFB, NM, in 1988, as part of our in-briefing to the area was a delegation from the town of Clovis telling us about how glad they are that we're here. The police chief gave a pitch that if anyone is retiring or looking to separate wants to become a police officer the city will send the to the police academy in Albuquerque. He went on to say they have a problem attracting and keeping officers because a year after they attend the academy and are on the job in Clovis they quit and go to work in Albuquerque or Santa Fe where the pay is higher. So basically what Clovis was doing was paying for the training of police officers for other cities and not getting much of a return on their investment.
Again, competitive wages would be the best solution. You get what you pay for.
The sad fact is there are some fast food companies who actually do that, which is wrong.
I'm in favor of banning the procedure. Again, the rights of workers are what's important here. More important than an extra cost for a company.
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Re: FTC proposes ban on non-compete clauses

Post by Glennfs »

gounion wrote: Fri Jan 06, 2023 4:37 pm I can see there being some sort of contractual control for that slim possible situation.

I would posit that the obvious fix for that is competitive wages.

My skill was learned in training at my original company. Some trainees would wash out or get fired, whether they hired in for the training or transferred in out of the shop, like I was. And, if there was a layoff, they were the first to go, forget about the cost of training.

And the training wouldn't get you a job as a toolmaker. You had to have 3 years experience, or no one would look at you. At all. I was laid off twice before my three years was up, and there were no jobs available, period. After three years, you could choose between lots of offers.

Again, competitive wages would be the best solution. You get what you pay for.

I'm in favor of banning the procedure. Again, the rights of workers are what's important here. More important than an extra cost for a company.

So you are OK with a company moving to Charlotte. Then hiring two salesman from Roadway Express. Having those salesman bring with them a list of Roadway customers and what they are charging.
Then going out and offering those customers a lower price.
Undercutting years of research and development and investment Roadway put into figuring out those routes and finding those customers.
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

Glennfs wrote: Fri Jan 06, 2023 6:05 pm So you are OK with a company moving to Charlotte. Then hiring two salesman from Roadway Express. Having those salesman bring with them a list of Roadway customers and what they are charging.
Then going out and offering those customers a lower price.
Undercutting years of research and development and investment Roadway put into figuring out those routes and finding those customers.
Yes. It's called a free market.

You didn't answer my question. Do you think you shouldn't be able to jump companies for a better deal for YOU?
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Re: FTC proposes ban on non-compete clauses

Post by Glennfs »

gounion wrote: Fri Jan 06, 2023 7:12 pm Yes. It's called a free market.

You didn't answer my question. Do you think you shouldn't be able to jump companies for a better deal for YOU?
I agree with number6 take.
BTW glad you are now on favor of right to work laws
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Re: FTC proposes ban on non-compete clauses

Post by Number6 »

gounion wrote: Fri Jan 06, 2023 4:37 pm I can see there being some sort of contractual control for that slim possible situation.

I would posit that the obvious fix for that is competitive wages.

My skill was learned in training at my original company. Some trainees would wash out or get fired, whether they hired in for the training or transferred in out of the shop, like I was. And, if there was a layoff, they were the first to go, forget about the cost of training.

And the training wouldn't get you a job as a toolmaker. You had to have 3 years experience, or no one would look at you. At all. I was laid off twice before my three years was up, and there were no jobs available, period. After three years, you could choose between lots of offers.

Again, competitive wages would be the best solution. You get what you pay for.

I'm in favor of banning the procedure. Again, the rights of workers are what's important here. More important than an extra cost for a company.
Competitive wages can help but that's not the cure-all. People may accept a similar offer at the same pay if the company they're working for doesn't value or treat them well.
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

Glennfs wrote: Fri Jan 06, 2023 7:44 pm I agree with number6 take.
BTW glad you are now on favor of right to work laws
Right to Work gives no rights and no work. It's funny how you run away from my question. Not funny, gutless.
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Re: FTC proposes ban on non-compete clauses

Post by gounion »

Number6 wrote: Fri Jan 06, 2023 10:13 pm Competitive wages can help but that's not the cure-all. People may accept a similar offer at the same pay if the company they're working for doesn't value or treat them well.
If people are quitting after training to go somewhere else, it's all part of the same package. You have to be competitive to keep employees.

In my case, I only would be required to pay back money I was directly given. How do you pay back for training? Who decides what that cost is?
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