Attorney General Becerra Renews Call for Nationwide Ban on Non-Compete Agreements, Reminds Businesses of Existing Prohibition in California

Thursday, March 12, 2020
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SACRAMENTO – California Attorney General Xavier Becerra today joined a coalition of 19 attorneys general in submitting a comment letter to the Federal Trade Commission (FTC) calling on federal regulators to issue a rule banning non-compete provisions in contracts, which can prevent employees from seeking better pay and benefits by going to work for a competitor. The Attorney General also used this opportunity to remind employers that, under California law, non-compete provisions are unenforceable in employee contracts for businesses operating in the state.

“Non-compete agreements are already unenforceable in California,” said Attorney General Becerra. “It’s time for the federal government to catch up and help put an end to anticompetitive practices that depress wages and hurt consumers. Employers should look to attract workers through wages, benefits, and quality of work, not one-sided provisions that block access to better opportunities. In California, we’ll continue to lean forward and insist on competitive business practices that reward hard work.”

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 by 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 last 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. The letter also builds on earlier calls by Attorney General Becerra and other attorneys general in July and November of last year urging the FTC to use its authority to protect against anticompetitive practices that depress wages and harm consumers. The FTC held a workshop in January to consider these requests and today’s letter contains a number of recommendations on how the FTC could use its authority to combat non-compete agreements nationwide.

In filing the comment letter, Attorney General Becerra joins the attorneys general of the District of Columbia, Maryland, Minnesota, Delaware, Hawaii, Illinois, Iowa, Maine, Massachusetts, Nevada, New Jersey, New Mexico, New York, Pennsylvania, Puerto Rico, Rhode Island, Virginia, and Washington.

A copy of the comment letter is available here.

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