Noncompete Agreements, Come On

A noncompete agreement, a pledge not to work for a competitor for a set amount of time, makes sense – when the worker is well compensated and privy to company secrets. But that doesn’t describe the vast majority of workers who’ve signed noncompetes.

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Episode Transcript

Speaker 1 (00:01):
Welcome to stuff you should know, a production of iHeartRadio. Hey,
and welcome to the podcast. I'm Josh, and there's Chuck
with me, and that makes this stuff you shouldn't Azzoh
that's right, mister dog. Yeah, man, what's that one song?

(00:25):
He had? A sensual seduction? What a great song that was.
I'm not sure if I know it. Would I know
it if I heard it? Probably, but it was like
kind of a weird synth dancy early eighties vibe, much
more than a rap vibe. He was just expanding out. Yeah, yeah,
that's Martha Stewart on it. No, which is kind of

(00:47):
surprising because I heard she got like a huge tattoo
of him. Really now, it was like a super Bowl commercial.
Didn't see it? Yeah she could have, though I'm a rube. No,
you're not, Chuck. You just don't pay enough attention to commercials.
Should we talk non compete agreements? Yes? I think we

(01:09):
should because they turn out to be rather onerous. Yeah,
possibly soon to be illegal, yay, and just kind of
scummy because, as you'll see, they're frequently used by big business.
But if you're a free market capitalist, you're not allowed
to like non compete agreements because it literally hobbles competition,

(01:31):
which is the point of free markets. And one of
the great things about competition is that you and me
and everybody else listening out there who doesn't own a
business and just buy stuff usually gets better prices, better products,
more innovation when there's greater competition. And non competition agreements

(01:52):
non compete agreements do the opposite of that. They stifle
all those things on purpose for the benefit of just
one company. It's right there in the name. They even
they gave away their hand when they called them no competes. Exactly.
It's pretty flagrant. It is. If you don't know what
we're talking about about. One in five Americans work under

(02:13):
an NCA, and a non compete is when and hopefully
you've never had to sign one of these. Hopefully you're
not one of the twenties percent of workers in the
United States. But if you are working under one, then
you know what it is. It's it's a thing that
you sign when you get a job. Usually when you
get a job. Sometimes they can come along a little

(02:33):
later in the job, if you get like a promotion
or something, but it's a condition of getting that job.
Most times that basically says, hey, if you work here,
you can't go quit your job and then go get
a job at another company that's a rival of ours,
or you can't run off. And like if you're a

(02:54):
if you're a vet, let's say, and you and you
help out doggies and kiddies and komodo drags or whatever,
you got to sign one that says, hey, you can't
go start up your own vet practice. And there's usually
a certain amount of time, like six months or three months,
or a year or two years generally where it caps off,
although I'm sure there's some really draconian ones that stretch

(03:17):
on for years and years. Yeah, I've seen five is
the highest i've seen, But I'm sure somebody's pushing the
mline five years. You can't go make a living and
doing what you do exactly, So you can hear by
the tone of my voice how I feel about these things.
I'm gonna try and be fair. I know you're you're
with me. We're pro employee. Yeah, also pro competition too,

(03:44):
but okay, go ahead. We're pro employee. So that's kind
of where our heart lies. We are employees, so that's
why that's where our heart lies. For the most part. Yeah,
but having said that, I do get in certain circumstances
why businesses draw these up at least as usual, Chuck,
I'm right there with you, totally agree. Should we talk

(04:06):
about these few reasons? Yeah, there's one other, there's a
couple of other things, just to kind of do the
outlines of these things. In addition to a length of time, usually,
like you said, that you're prohibited from going and working
for yourself or competitor, there's also sometimes geographical restrictors, which says,
you know, you can't work for a competitor in the

(04:28):
same state or something like that. Right, feel free to
move completely, upend your life and move time with us,
but you can't do it in the state. And then
one of the other times it pops up pretty frequently
outside of the corporate world, is when say you sell
a restaurant, you'll usually sign a non compete that says
you're not going to go down the block and create
the same restaurant again and compete with the one you

(04:50):
just sold, because you know, again, like you said, there's
some instances where it does seem okay, and yeah, let's
go over some of those. Yeah, one of them is
guarding trade secrets. I kind of get where they're coming from.
If you have a trade secret that's really valuable and
it's something that this company owns or thought up at
least or as the IP rights, do, I get why

(05:13):
company would not want to say, like, sure, just go
quit the job and take those secrets with you to
a competitor. Yeah. Like, um, do you remember when those
former Coke employees went to Pepsi and said, Hey, we've
got Cooke's recipe, you want it? It must have been
so surprised when Pepsi called Coke and said, hey, you've
got a big problem. That was pretty interesting. But yes,

(05:35):
I'm quite sure they signed all sorts of agreements that
they violated in doing that. Yeah, and we'll get into
the details later on. But you don't necessarily like you
can cover trade secrets with by other means rather than
just signing a noncompete as an employer. Right. What else? Well,
this one I kind of get to to a certain degree.

(05:57):
Companies oftentimes will make great investments in their employees to
keep them around. Like whether it's just the normal training routine,
which you know, I know from Emily just having her
small business, it takes a long time to get someone
really up to speed, and for someone to either not
work out by just organic circumstances or leaving shortly thereafter,

(06:17):
it's a big blow, especially to a small business. So
I get that. Or they may like further your education,
say hey, we'll put you through grad school or something
like that, but you got to come take that grad
school knowledge and help our business with it. Sure. The
point is that you don't want to invest a bunch
of time and effort and information into training and employee

(06:38):
and have them go take it to a competitor. Yeah,
I get that somewhat. There's another one. I'll bet you
get this a little less because I do too. Yeah,
Like I understand it, I just don't agree with it.
And that is to keep bases of clients right. So
like if you're if you are, if you cut hair
at a hair salon, there's especially depending on the salon,

(06:59):
but there's a really good chance that you signed a
non compete that says like you probably can't cut hair
in the same town right anywhere else. That's a pretty
prevalent from what I understand it. Like hair salons, there's
other places too that try them, like law firms, sometimes
try them VET clinics like you you recommended, But I
believe there's also some industries, including attorneys and fiduciaries, that

(07:21):
say it's too important for the client to be able
to choose exactly who they want for us to have
non compete, so they kind of customarily avoid them. Yeah,
this is you're on target, because this is the one
that I have the one of the most problems with
out of these three, because this basically says we can
kind of treat you poorly as an employer. Like if

(07:45):
you're let's say, if you're a hairstylist and you don't
like your situation, but you've got these clients who love
the way that their hair is getting cut by you,
but you've got some terrible boss. It's a bad agreement.
You should be able to go and have those people
follow you because they're not there because they like the
fit of the chair, right, you know, they're there because

(08:07):
they like the haircut that they're getting. Absolutely, it is
so hard to find a good hairdresser who charges a
reasonable rate. It's really important. I'm not joking right now.
I finally found my guy, and like, if he ever leaves,
I'm I'm in trouble the same thing with like a
dog groomer, Like we've lost dog groomers before, just gone
poof vanished. Then the people won't tell us what happened

(08:29):
to them or how to get in touch with them,
because they want us to stay there. And it's it's
you're not only hurting your former employee, you're also harming
your customers too, because you might be pairing them up
with an inferior dog groomer compared to the person who
just left. You know, yeah, I should shout out my

(08:50):
hairstylist because it's fairly recent, because I recently in our
Amorrow podcast talks about our friend Thomas, who is the
father of one of Ruby's friends. Thomas's wife and Ruby's
friend's mom is Robin and she is my friend and stylist. Nice. Well,
then she's great. I'll shout out Michael, my hair stylist.
And if they went to you know, if Robin decided

(09:11):
to go to another place, I wouldn't be like, No,
I'm really super loyal to the walls of that building
that I was in, right, No, I'd follow Robin where
she went. Yeah, I agreed, totally. I'd follow Michael to
the ends of the yearth So there's another way to
look at all this stuff too, Chuck, You're ready. Yeah.

(09:33):
People who are pro non disclosure agreements say that these
things work in the non competes you mean, yeah, yeah, sorry, man,
I just gave away something we're gonna talk about later.
People who are in favor of non competes say that
the opposite holds true too, where if you take away
non competes, then companies might be less willing to invest

(09:56):
in their employees because they're going to, um, you know,
possible walk off. Um. Yeah, that's that's probably the best
argument they have against them. But it's very similar. I
was trying to think of an analogy, and the best
I could come up with is saying, like, because there's
a chance that some of our guys are going to
strike out, we're just not going to play baseball, right,

(10:17):
you know what I mean? Yeah? Yeah. And then if
the whole inherent unfairness of a non compete agreement, by
the way, like all the all the pros are done now, Um,
if it hasn't become clear yet, you can if you
take the business out of it, it becomes much clear. Right,
So if you look at your employment between a worker

(10:37):
and an employer as a relationship, like between a boyfriend
and a girlfriend or something like. If you break up,
it's like the boyfriend saying you can't date anybody for
a year, or you can't date anybody in this state
for a year. Go ahead and move up, end your life.
That's fine, but no one in this state you can date.
And then it can get yes, that's that's a great point,

(11:00):
and then it can get even worse. The boyfriend can
dump you and still say you're not allowed to date
anybody for a year. Right when I thought of it
like this, like I already knew they were inherently unfair,
but it really kind of settled in, so I wanted
to share that with everybody. That's good. What's interesting, especially
when you look at the example of like a hairstylist,

(11:21):
is chances are that hairstylist was already a good hairstylist
when they started working for that place, and it wasn't
kind of how these things started out, which is, you know,
segues into the history where you I don't know anything
about cutting hair, and I'm just gonna apprentice with you
for a while, and you're going to teach me everything
I know about how to cut hair, like that's a
little more understandable. And that's at least in England. That

(11:44):
was the history of non competes was in fifteenth and
sixteenth centuries. The way it was set up was there
were you know, master craftspeople and then they had apprentices
working for them and they would teach them their trade
and in turn get a lot of work out of
this person, and then they could go on and try
to become a mastercraftsman themselves, start up their own you know,

(12:07):
habitash or shoe shop or whatever. And early on in
for quite a long time, even the courts of England
and the laws of England roundly sided with employees when
it came to case law, and the very first of
which was the Dyer's case of fourteen fourteen, yeah, which

(12:27):
established a precedent that lasted for hundreds of years, which
is basically there was a dier, you know, fabric dyer
in London who had an apprentice and the apprentice was
ready to become a journeyman, no longer an apprentice, going
off to strikeout and form his own business. And he said,
you're not allowed to do this business in London, all
of London for six months, and in the fifteenth century

(12:49):
it wasn't very easy to move right right, So the
guy took him to court somehow in the fifteenth century way,
and the court said, we rule against you, die, or
we rule in favor of your journeyman apprentice, because they
reasoned that the law and custom should keep work in
the public domain, labor should be as free to do

(13:12):
as much as it can for as many people as possible. Yeah,
which makes sense, like maybe there aren't enough talented DIYers
in London right now, and for goodness sakes, like the
people need their tight eyed frocks, right, Thou blowest my mind.

(13:33):
It's good. I was waiting for another wavy gravy joke.
I know he's your gut to. He's the only one
I can ever think of. And then the other one
is that And this is a big part of this precedent,
was that someone should be allowed to go make a
living doing what they've learned to do, right. And there's
something inherent in both of those reasonings that set that
legal precedent in that they recognize that a noncompete favors

(13:58):
essentially one per in one group, one employer, one company,
one business owner at the at the expense of everybody else, right,
and they kept that up for hundreds of years. The
the what are they called, I guess the guild members
who were employing apprentices. Over the years, they employed more

(14:20):
and more apprentices as there was more and more people
who needed more and more work. So there's more and
more attempts. I don't think I could say more and
more any more time, but there are more and more
attempts I could at creating these um non compete agreements.
But the courts kept basically saying nine no, no, although
there was one that kind of went the opposite way,

(14:42):
which does seem like they made the right decision, but
it sent another precedent that actually upholds non competes. Right. Yeah,
this is Mitchell versus Reynolds in seventeen eleven, and Reynolds
was a baker. This one is. I agree. It's definitely
an interest in case because it's not like your standard
employee employer kind of thing. Right. M. Reynolds was a

(15:06):
baker who said hey, I will lease Hey there, Mitchell,
I'll lease you my bakery for five years and you
can do all the baking and make the money, and
I'm not gonna go start another bakery in this town,
which is Saint Andrew's Holborn. And I don't know why
I lost the accent halfway through that. And if I

(15:27):
violate this agreement, I give you fifty pounds and that's
exactly what I'll do, though I will go on to
break this deal. I'm gonna sell my stuff in town
and my baggetts or what have you. And Mitchell took
Reynolds to court and the judge sided with Mitchell in
this case. Yeah, because I'm quite sure I get it though.

(15:50):
This is this is why, this is why I think
it makes sense to us too. Mitchell and Reynolds were
um equal parties to this agreement. There was no power
position of one over the other. And that's one of
the reasons why are so unfair. It's a really powerful
entity taking advantage of the last power of the other person,

(16:15):
the employee that's on the other side of the equation.
In this case, they were equal and the guy broke it.
And yeah, he should pay because he agreed to this
ahead of time without any kind of of you know,
coercion or anything like that. Because Mitchell was able to
run this business and do the baking and make money,
and Reynolds was getting lease income from Mitchell. Yeah, so

(16:38):
he Reynolds was trying to have his cake and eat
it too. Basically exactly, he was a real big jerk
quad from what I can tell, we bleeped out your
first take, which was a cuss word, But jerkwad sounds
grosser than what you said. I think jerkwad was better.
I made the right decision in retaking that. Things you know,

(16:58):
started changing when industrial capitalism became a big thing and
the courts started kind of flipping a little bit all
of a sudden, they said, wait, this big business and
capitalism is great, so we should be a little more
pro employer than employee generally speaking. And I think it

(17:18):
was basically by the mid eighteen hundreds that they said, hey,
we believe in freedom of contract, which basically means if
you're both agreeing to this thing, then you should be
able to agree to this thing right, which again it
makes sense if you're Mitchell or Reynolds, who were on
even footing when entering into that contract. But people still
use freedom of contract as a defense of non competes.

(17:41):
And we'll walk down that path a little more later,
I say, Chuck, for right now, let's just go ahead
and take a break. Let's do it all right, I agree,
let's sign a contract agreed. So all this is going

(18:22):
on in England, and at the same time America is
doing its thing buying Louisiana, etc. And there wasn't really
any big non compete rulings until I think eighteen fifty one.
But leading up to that, there's a legal scholar named
Aisha Bell Hardaway who Olivia found. Livia helped us with

(18:42):
this one, and Yisha Bell Hardaway says that there was
still a bunch of like legal precedents and rulings and
laws that were established that basically support the idea that
non competes are unfair and that people should have the
ability to move about from employer to employer until they
find a good match um. And that a lot of

(19:05):
that came from reconstruction era and the Black Codes and
some of the laws that protected newly freed slaves um
to from like really um predatory business contracts that like
they could they could go to jail if they ended
the business, if they stopped working for the person, you know,

(19:25):
early they could go to jail for five or ten
years or something crazy like that. So the UM, the
US government, the federal government started stepping in and creating
these laws and including the Thirteenth Amendment that protected people
from that, and Hardaway argues that that's kind of a
basis for the America's position on non competes. Yeah, like,

(19:47):
congratulations on your emancipation. Um, Now you can enter into
a work contract that's basically the same thing as being enslaved, right,
except you know, you're you're making money, but if you
quit your job, you're going to jail, but also making money,
but you're making just enough to live. Well, you need

(20:08):
your job so badly you are engaged in what's known
as wage slavery, where you're so dependent on your job.
You're essentially stuck, and your employer can treat you however
they want, because number one, you're disposable because there's plenty
of other people who need a job. And then secondly,
they know that you can't go anywhere. You're stuck. You
need this job, and they often mistreat employees. And it

(20:30):
still happens today. Yeah, And like in England, early on
in the United States, the courts generally were siding on
the side of employees. There are quite a few cases
that sort of laid out precedent. One was really big
in eighteen seventy two. California even way backed then said

(20:50):
we're going to be a bunch of liberal hippies and
we're going to ban noncompetes altogether. Because here in the
United States, if you don't live here, a lot of times,
states are free to make their own laws concerning things
having to do with their state States Rights, States rights
and USA are low key mantra. States Rights. In California

(21:14):
was one of the first states to completely or maybe
the first state to completely ban noncompetes. Yeah, they said,
we don't know who he is yet, but in one
hundred or so years, Wavy Gravy's gonna love this. And
it went that way for you know, most of the
twentieth century. If ncas were allowed, they were pretty limited
in their enforcement and usually covered things like we talked about,

(21:38):
like trade secret cases and things like that, because you know, enforcement.
I didn't know about any of this stuff until you
and I entered the world of like signing contracts as
podcasters and stuff. I had always just had jobs where
you could work and get fired and quit and it
was no big deal. But I think you and I
learned an awful lot about contract stuff yea, through our

(22:01):
work and like how to read them and how many
words there are in them, yeah, and how lawyers charge
so much money for reading those words imperpetuity, imperpetuity throughout
the known universe, throughout the universe. That wasn't one of
them once, right, Yeah, So like we couldn't go to
Mars and set up of Mars farm and start podcasting

(22:23):
about it. No, we'd be served on Mars. But anyway,
we learned, and this was shocking to hear of something
just called unenforceability of a contract. We kind of thought
going into this thing like Rubes like, well, no contracts,
that that means you signed a contract. They're like, no,
you still got to enforce this. It's just like setting

(22:44):
a law. Someone can still break that law. You have
to have enforceability. And a lot of times these things
were not enforceable in the United States, right, but still are. Yeah,
that's absolutely true. But if you are somebody who's like
a highly skilled laborer who has access to proprietary information,

(23:05):
trade secrets, intellectual property, all just really high level stuff,
as far as the corporation is concerned. Very valuable stuff too.
If you're one of those workers and you signed a
noncompete agreement and you break it, you're probably going to
get ruled against depending on the state. If it's a
state that allows noncompete agreements, you're probably going to lose

(23:28):
that case because the courts have typically said okay. At
that level, you can probably hire a lawyer who can
explain to you what you're getting into beforehand. You probably
have a little bit of leverage where you can say,
I don't want to sign a noncompete, I'll give this
up instead. Or conversely, you can say, I'll sign your noncompete,

(23:49):
but you got my salary by ten percent or something
like that. And in that respect, it goes back to
the Mitchell versus Reynolds case. These two people, the employer
and the employee are on relatively equal footing enough so
that they're able to negotiate this non compete, and um,
that's why it would be upheld. Typically, that's that's when

(24:10):
it actually really makes sense. Yeah, So that brings us
to today. Um, Like I said, I think one in
five people in the United States work under a non
compete um, employers generally over the twenty first century have
gained more leverage and more power over workers, even though

(24:30):
I think starting in with COVID in twenty twenty, I
think there's been UM not, I think like it's been
pretty well documented that there's been a shift toward employees
gaining a little more power and leverage. Yeah, but that's
new because it went the exact Yeah, it went the
opposite direction starting around the two thousand and eight financial meltdown. Yeah. Um,

(24:52):
there's a guy named Evans Starr who Olivia found that's
an economist at the University of Maryland. And as kind
of if you just start researching non competes online, you'll
see Evans Starr name, Star's name come up a lot.
And uh, if you're like a CEO or not a
CEO but an executive let's say executive level employee, chances

(25:14):
are you're working under a non compete. I think sixty
to eighty percent have to sign them, doesn't it. Yeah,
I would think it'd be more like eighty to ninety percent,
But I mean, who knows where they get these stats.
I don't think so. Um, but twenty percent. Uh so

(25:38):
sixty to eighty or high level executive level. But twenty
percent of all private sector workers are under a non compete.
About twelve percent of those make under twenty grand a year. Uh,
and this was really surprising. Seventeen percent are in service
work and the food and beverage industry. Yeah, and so

(25:58):
because there's so many more just like normal everyday employees
compared to like higher level executives, and because they've been
papering so many employees with non compete agreements that the
average person in the United States working under a non
compete is an hourly worker making fourteen dollars an hour

(26:18):
being forced to sign a noncompete. And I say forced
because in the case of m like a high level
executive who's able to negotiate or Mitchell and Baker that
in this case the employee is not able to negotiate anything.
Then the courts typically say, you can sign a noncompete,
but the company should give you something in consideration, typically

(26:41):
some sort of additional pay or something like that. In
the in the world of a fourteen dollars an hour
hourly worker who's signing a non compete, the consideration is
you get to be employed here. That's that's your consideration,
you can get to have this job that is in
no way, shape or form equal footing. And that's why
so many people pointing to these things and they're like,

(27:02):
this is this is jerk quad stuff. Yeah. The New
York Times had a big sort of expose in twenty
fourteen where it was revealed that and get these jobs
long care workers again, hairstylists, summer camp counselors had all
signed non compete agreements that was just sort of slipped

(27:23):
in with their paperwork, not realizing they'd signed it, not
fully explained or maybe explained even at all by their employers.
They're just like, here's your start work, just signed here here, here, here, right.
And there was a special case I believe that the
Huffington Post sort of exposed from Jimmy John's, the sandwich
shop where employees had to sign and non compete that

(27:45):
said you can't leave Jimmy John's and go work for
you know, a sandwich company not to be named. They're
say it, really, I'm just going to go take the
underground train and leave meeting really any sandwich shop, of course,
but I think they mean their main competitor, probably within

(28:06):
three miles of any Jimmy John's, not just the one
you worked at. And I don't know about their their
real estate plan for that company, but I bet you
anything part of their strategy is to open their restaurants
within three miles one of those other restaurants. Ye, so
basically said, I'm sorry if you're a sandwich artist, but
you can no longer really do this job right. And

(28:28):
I mean this isn't like like people who are sandwich
artists typically like need a job. Like there's very few
independently wealthy people who go get a job at Jimmy
John's because they like making sandwiches during the day. You know,
it's a it's a good job. I'm sure it's very fulfilling,
but typically when you have that job, you need the job.

(28:49):
And so the idea of putting a person in that
position into like just hobbling them as far as work
goes despicable. Man. I don't know if it's coming across
how I feel about non compete, but just every single
example just gets me riled up. You know you want
to hear something kind of fun. Yeah, Um, Our friend

(29:10):
John Hodgeman loves making breakfast sandwiches so much that he
spends his summers in Maine and there's a local like
breakfast place and he makes he goes there and works
occasionally for free. Yeah, just for the love of making
breakfast sandwiches. Yeah. But also I don't think you can
discount holding court. I think that's part of his compensation. Yeah.

(29:35):
And and the T shirt money he gets from my
egg sandwich was made by John Hodge. Humorous John Hodgman.
That's the sweetest plump. We should point out too, though,
by the way, that Jimmy John's did that for a
couple of years and then when the state Attorney general
started investigating, they dropped that practice. Oh that's good. Sure,

(29:55):
nothing like the state investigation to to get you, uh,
within the bounds of hic morality and decency. Um. There's
also something called a no poach agreement, which came under
fire in the two thousand Tents as well. Um, where
if you open a franchise, you would probably sign a
no poach agreement saying that you wouldn't hire any worker

(30:15):
from another store in that company another franchise, say like
across town. Right. This is really hard to give examples
and not buzz market any companies, you know. Yeah, I
think we're doing it though, we're doing okay. So like
if you went to um, you know, mister Sandwich and
you didn't like your boss there, so you you went

(30:36):
to go get hired at another mister Sandwich, if they
had a no poach agreement, that second mister Sandwich would
say sorry, we can't hire you. Or yeah. Conversely, if
you if you run an mister Rose beef sandwich place
and you have the meat as an owner, you can't
go cheez the uh Fred over there at the Crosstown

(30:59):
Mister Roast Beef Sandwich really moves that beef like nobody
I've ever seen. This guy settles a beef like a champion.
You can't say entice this person by saying, hey, I'll
pay an extra buck fifty an hour to make your
beef sales over here. Yeah, that would be poaching for sure.
And then you can you can thank again state investigations

(31:20):
for doing away with this. Largely some of the larger
chains said oh, yeah, we shouldn't do that. We're not
going to do that anymore. You can call off your
state attorneys investigations. So we've been sort of peppering in
the I'm against NCAA arguments, there are actual statistics to
kind of back up some of the stuff that we

(31:41):
feel passionately about. In one case, in the state of
Oregon in two thousand and eight, they banned non competes
for most workers, but one of the categories was low
wage hourly employees that we were speaking about. And mister
Starr comes back in the picture and a gentleman named
Michael Lipsets of the FTC Bureau of Economists, and they

(32:06):
did some statistical analysis and found in an Oregon hourly
wages rose two to three percent, not just for people
who would signed NCA's but for everybody in the state. Yeah,
and they reckon that maybe between fourteen and twenty one
percent of people who signed ncas had their Well wait,

(32:26):
was it fourteen to twenty one percent of workers? No,
that's how Yeah, their wages increase fourteen to twenty one
percent for people who had been working under non competes
after they were banned, it went right that much. That
is a I hate the word whopping so much because
I want to do a little tangent here, chuck um.

(32:46):
If you use the word whopping in your writing, what
you're doing is you're assuming that your readers too stupid
to understand that what statistic you've just said is actually
like eye popping or like really significant. You're spoon feeding
them the fact that, like, hey, this is a really
big deal, rather than just letting them figure it out themselves.

(33:07):
Are knowing that they probably are going to figure it
out themselves, So don't use whopping. But the point is
this best statistic is so huge. I will use the
word whopping here because it's the true definition of whopping.
It's overwhelming. I can barely speak at such a big deal,
I think. Instead of writing whopping, though, what you can
do is say, get a load of this and then

(33:30):
have a little button you click that goes, damn yeah,
how about this for a whopping statistic? Though, to sort
of button up on the stats. The FTC has estimated
that if they eliminated ncas all across the country I
guess federally, or if every state did, it would generate
new job opportunities for up to thirty million workers and

(33:53):
raise wages by three hundred billion dollars. Yeah for those workers. Basically,
that's not even spillover stuff from what I understand. And
there's another little stat from that same FTC study that
if you eliminate eliminated non competes for doctors, healthcare costs
would go down by about one hundred and forty eight
billion dollars too. Wo Yeah, which is another problem in

(34:15):
and of itself. Doctors who signed non competes can't move
from hospital to hospital, and so hospitals can basically hoard
um medical talent while other hospitals are starving for it.
Because these doctors have non competes, they can't just go
to this other hospital that really needs their help. And
that's that's a problem too. I Mean it's bad enough
with like franchises of Mister Sandwich. When it's hospitals preventing

(34:38):
doctors from going to heal the sick, that's a huge
problem as well. Yeah, if you're arguing against NCAA's California,
like I said, was very early to get on that
anti nca train, people will often point to California and
especially the tech industry. Like in twenty fourteen, the state
of Massachusetts said should we ban non pizza or not?

(35:00):
They eventually did in twenty eighteen, but they said one
of their arguments was look at California. Yea, Like back
in the seventies, we were on par with like the
Boston areas, on par with San Francisco as far as
tech development, and the fact that we had non competes
really hindered us. And look at what happened in California.
It's now that the tech capital of the United States,

(35:22):
if not the world, Northern California and Silicon Valley and Boston,
you know, didn't fall off the map. There's still good
tech there, but it didn't become what California did. No,
because the ncas were so efficiently enforced that when you
signed on for a company, you're like, well, I'm here
for the rest of my career. Yeah, and ideally you
know the company would take care of you for the

(35:43):
rest of your career. So there was a trade off
for that, but that just meant that there were no
people jumping chipping, like starting their own companies, and they
were doing that in Silicon Valley. I say, we take
a break. But I've got two more arguments against non competes.
So one is that it stagnates job churn. And job
churn is people being able to move from employer to

(36:04):
employer until they find the right fit. Because ideally every
worker and every employer would fit and work together well,
which would raise general productivity through the roof. Of course,
if that were able to be done, and job churn
is how that happens. And then in a related way,
if people are allowed to just jump ship from a
terrible company, that company is bound to basically say we

(36:28):
need to figure out what's wrong with us and get better,
or else we're going to not be competitive anymore and
our company is going to go under. If you force
everybody to stay aboard the sinking ship through non competes,
there's no way to do it. No. Plus, I mean,
you're just basically stagnating your company and the careers of
the people who are on board. Yeah, you keep people

(36:49):
by being a great company to work for it exactly
you done by holding them hostage because their name is
on a piece of paper. I'm glad you said it. Man,
that's a great time for a break. All right, We'll
be right back, all right. So early on you said

(37:29):
that's the last argument for NCA's um. That's not entirely true.
But there is one group who would say that ncas
are great, and that is the US Chamber of Commerce.
And they say that one of the things that we
m we didn't like completely quash, but they say, hey,
when you sign a noncompete, that means you're probably getting

(37:50):
something good back in return to which means it's equal footing.
And like you said earlier, unless you're like a really
top tier echelon person who's able to negociate, like hey,
a twenty five percent bump and salary to sign this thing,
then you're probably not geting getting nothing in return. Yeah,
you're just getting the job and shut up and be
happy that you even have a job. Get to work, basically.

(38:13):
Another one is that that thing that you and I
agreed on that companies would probably be a little more
likely to invest in their workers if they have a
good sense that their workers aren't going to just leave
for their competitors. Yeah, that holds up, But it only
holds up to a certain extent, because if you invest

(38:33):
in your workers and like really good training, what you're
doing is producing an employee who understands your product, understands
how the business goes, understands their department really well. So
they're probably really good at customer service. They know what
they can and can't promise, They understand what can be
replaced with what they're just they know what they're doing,
and so productivity goes up, which means that by training

(38:55):
that worker, you're actually making your money back. And then
some there's a return on investment, and that usually comes
pretty quickly after they come on board and are brought
up to speed and become productive. So after throughout the
life of that person's employment with you, you made your
money back, and say like the first quarter of that time,
the rest of it is just profit from that higher productivity.

(39:17):
So it does hold up. The argument does hold up,
but it only holds up so far, right, And then
one other thing is that the Chamber of Commerce likes
to do that freedom of contract thing where they're like, hey,
we should not be treading on employees rights as adults.
They say this, sometimes assign whatever contract they please, and
they leave out of it entirely the imbalance of power.

(39:40):
But that's one of the that's one of their talking
points as well, typically freedom of contract. Yeah, we mentioned,
and you sort of inadvertently teased earlier, other kinds of agreements,
and we mentioned these because a lot of these are
workarounds to just signing a full non compete, like the
trade secret thing that we mentioned, you can sign a

(40:00):
nondisclosure agreement or an intellectual property agreement. In the case
of nondisclosure, it means you can't disclose stuff that went
on at your company, like we can't you know, in
the case of like podcast networks, you couldn't jump to
another podcast network and say, oh, well, this is how
we do our ad sales or whatever. You can't do

(40:21):
that because you signed an NDA. But that's not the
same thing as a noncompete. You can still go get
that job with IP property or intellectual property agreements. That's
obviously if you work for that company and you come
up with an idea while you're working for that company,
they basically own that idea. Another one is a non
solicitation agreement, which is sort of like a non poaching thing,

(40:45):
which means you can't go out and like if we
went and started our own podcast network, we couldn't just
sign all of our friends that we've worked with for
twenty years, right, or you know, get all the customers
or something that we've been interacting with the salespeople for
whatever company we work for. Yeah, but here's the thing
with some of these, like like I have a friend

(41:06):
who worked for someone doing a service as the employee,
and I don't want to get too specific, but the
employer like usually when you're like, you know what, I
could do this and I'm better at it, and I
could do better at it, and the clients will follow me.
Usually you're doing that because the situation you're in stincts,

(41:27):
you know, like you got an owner that's not treating
your right or an owner that doesn't do any of
the work and they're just sitting back and collecting checks
while you're doing everything right. Usually, I mean sometimes people
it's just like got a great situation and they're like,
you know, I would like to do this myself as well.
That does happen. I'm not saying it doesn't, but it's
usually because like it's a bad employer and a bad

(41:49):
business to begin with the other way. It's got to
be so frustrating too. If you're working under a non compete.
Is if you have this great idea and you do
what you're supposed to do in that situation as an employee,
and you take it to your employer and say, let's
do this. This is going to make the company a
bunch of money, and they're like, nah, it's not worth it,
and so your idea just dies. Then people like you

(42:11):
and me, we suffer for that because we miss out
on the amazing innovation or that extra competition that drives
prices down a little bit. It has a huge kind
of society wide effect. Yeah, for sure. I guess the
last thing we should mention is the pay not to play.
It's also called the garden leave, like you're taking time off,

(42:31):
it's into your garden. This is when an employee leaves
and a company might say, hey, don't go work for
a competitor for six months, but we'll pay you for
those six months. Yeah. It's often something like fifty percent
of the salary that you have over the last two
years or something. Yeah, exactly, which is pretty sweet. And
again that's consideration in exchange for signing a non compete,

(42:53):
which makes or you might get bought out of a
contract or something like, hey, we'll just buy you out
of your contracted but you can't go work for anyone else. Yeah, so, chuck,
there's if you weren't like Boo, I hate non competes
before prepared to join the wagon or jump on the wagon. Yeah,
the bandwagon. Some companies, including companies in California still use

(43:18):
non competes. They still make their employees sign them. And
they do this because they can still threaten their employees
with a lawsuit for breaking this noncompete that's illegal to
begin with, because they know their employees either number one,
don't know that non competes are unenforceable in some states YEA,
or number two, even if they do know that, don't

(43:40):
have the means to defend themselves, to hire a lawyer
to defend themselves, even if they're on the right side
of the law. That is despicable. It is as is
using saying like, all right, we don't have a non compete,
but we're going to draw up our non disclosure agreement
or non solicitation agreement so broadly that it's basically a noncompete. Right.

(44:02):
So because of this, because that's becoming more and more common,
and apparently also there's a twenty twenty two article and
Benefits pro the Employment Benefits trade magazine of Record that
said that more employers are more and more frequently turning
to threatening lawsuits over non competes because they're they're low

(44:24):
on workers. Because it's a it's a it's a worker's market,
right now it's not an employer's market anymore. So to
keep people employed, they're threatening to see their own employees basically, yeah, uh,
and this is you know, I'm not sure if you
picked this one for this reason, but this is a
hot topic right now, largely because of what's been going

(44:44):
on with employees getting more rights. And there's a new
proposal as of just last month in January twenty twenty
three from the FTC that would ban noncompetes altogether basically
and avoid the ones that are currently in plays, which
would be a huge d Biden signed an executive order
in twenty twenty one that encouraged the FDA to band

(45:06):
and limit them. And yeah, the FTC, and it basically
says that it forbids you from using these and you
have to like let people know. You know, in the
case you were talking about in the California where they
basically signed them and didn't know, you have to let
these employees know that they're under a noncompete and be
like really clear with the language, right you, Well, you

(45:28):
also know no, and it's not valid anymore. Right, it's
saying like you can't you can't have them. Not only
can you not sign somebody under a noncompete agreement, like
you have to let them know that the ones that
you used to have that we're valid, are not valid
any longer. They've been outlawed. Yeah, like they shouldn't have
to go pay an attorney to tell them that exactly.

(45:49):
And it even goes even further. So some of those,
like um other types like a non disclosure agreement that
can be so broad it's effectively and noncompete those are
those are basically outlawed as well. It's a huge idea,
And right now they're taking public comments through March twentieth.
So if you're like, I, here's ours exactly. If you're

(46:09):
like I don't really feel good about non disclosure agreements
or non competes, then you can go leave your remarks.
The Chamber of Commerces said we're gonna sue you. FTC.
You can't do this, and the FTC said, oh, yes
we can. So we'll see what happens, either with the
FTC directly doing it, or if the FTC finds out

(46:30):
that their hands actually are tied. Congress might actually step in.
There was a bipartisan bill that was introduced in twenty
twenty one that basically by by partisan. I know, if
you completed us it's a very strange sounding word. I'm
glad you brought up where I got this idea, because
it turns out I got this idea from um. She
sent me an article about this FTC proposal and how

(46:51):
it would save three hundred billion or create three hundred
billion in salary. Just pretty was the subject line to No.
She said, check out this whopping stat right, it's like
the old click date. Yeah, exactly. You won't believe number eight.
He got anything else? Uh no, just a listener mail. Okay, Well,

(47:14):
since Chuck just mentioned listener mail, that means it's time
for listener mail. That reminds me of The Simpsons. Yeah,
I know exactly, Harmon Tansyrian, And now i'd like to
introduce your new Principal Skinner. Principal Skinner. I thought you
were gonna say you remember our friend Brian, the sound
guy from the TV show. Oh sure, Every once in

(47:35):
a while he emails me just one line from The Simpsons.
Really walk into the bar and there's tons of carbon
monoxide in the bar, and everybody's passed out, and the
guy says, man alive. There are men alive in here.
Brian texts me every now and then. He's a talented
musician in the band The Georgia's Soul Council. Yeah, that's right,

(47:58):
he's a great guy too. Go see him all right,
here we go, new mom life saver. Well, just like
these little nice emails every now and then. Hey, guys,
my now husband introduced me to your show during the
infamous spring of twenty twenty, and I've enjoyed hours of
educational entertainment since then. We welcomed our little boy, Ronan
into the world in December, and I'm working on turning

(48:19):
him into a fan as well. Stuff you should know
has been part of his life since he was a
wee embryo. We listened to a lot of podcasts during
my pregnancy. Certainly some of it made it through all
that amniotic fluid. I'm currently on maternity leave with him
and we are continuing to listen to the podcast together.
Have a lot of fun choosing episodes for us to
listen to. I hope I think I'll do a great

(48:40):
job sharing information with folks in an accessible and inclusive way,
and hope that maybe some of this information sticks in
his subconscious Nothing else hearing else voices and the positivity
behind them is great for his brain development. And Mom
gets entertainment too, so everyone wins. Thank you for making
these hectic days and long nights of new parenthood more

(49:01):
bearable and for teaching both of us something new every episode.
Yours truly, it's a great way to sign up. Email.
By the way, classic Heather and Ronan Man. Apparently dad
doesn't get any mentioned except turning her onto this thing
to be in with. He's the og. That's right. That
was an amazing email. Thanks Heather and Ronan. That was great. Wow,

(49:22):
thanks to Ronan's dad. Yeah, big thanks to Ronan's nameless dad.
If you want to get in touch with us, like
Ronan's nameless Dad's wife Heather did, you can do it
by email, Wrap it up, spank it on the bottom,
and send it off to Stuff podcast at iHeartRadio dot com.

(49:44):
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