Federal regulators on Tuesday [April 23, 2024] enacted a nationwide ban on new noncompete agreements, which keep millions of Americans — from minimum-wage earners to CEOs — from switching jobs within their industries.
The Federal Trade Commission on Tuesday afternoon voted 3-to-2 to approve the new rule, which will ban noncompetes for all workers when the regulations take effect in 120 days [So, the ban starts in early September, 2024!]. For senior executives, existing noncompetes can remain in force. For all other employees, existing noncompetes are not enforceable.
[That's right: if you're currently under a noncompete agreement, it's completely invalid as of September 2024! You're free!!]
The antitrust and consumer protection agency heard from thousands of people who said they had been harmed by noncompetes, illustrating how the agreements are "robbing people of their economic liberty," FTC Chair Lina Khan said.
The FTC commissioners voted along party lines, with its two Republicans arguing the agency lacked the jurisdiction to enact the rule and that such moves should be made in Congress...
Why it matters
The new rule could impact tens of millions of workers, said Heidi Shierholz, a labor economist and president of the Economic Policy Institute, a left-leaning think tank.
"For nonunion workers, the only leverage they have is their ability to quit their job," Shierholz told CBS MoneyWatch. "Noncompetes don't just stop you from taking a job — they stop you from starting your own business."
Since proposing the new rule, the FTC has received more than 26,000 public comments on the regulations. The final rule adopted "would generally prevent most employers from using noncompete clauses," the FTC said in a statement.
The agency's action comes more than two years after President Biden directed the agency to "curtail the unfair use" of noncompetes, under which employees effectively sign away future work opportunities in their industry as a condition of keeping their current job. The president's executive order urged the FTC to target such labor restrictions and others that improperly constrain employees from seeking work.
"The freedom to change jobs is core to economic liberty and to a competitive, thriving economy," Khan said in a statement making the case for axing noncompetes. "Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand."
Real-life consequences
In laying out its rationale for banishing noncompetes from the labor landscape, the FTC offered real-life examples of how the agreements can hurt workers.
In one case, a single father earned about $11 an hour as a security guard for a Florida firm, but resigned a few weeks after taking the job when his child care fell through. Months later, he took a job as a security guard at a bank, making nearly $15 an hour. But the bank terminated his employment after receiving a letter from the man's prior employer stating he had signed a two-year noncompete.
In another example, a factory manager at a textile company saw his paycheck dry up after the 2008 financial crisis. A rival textile company offered him a better job and a big raise, but his noncompete blocked him from taking it, according to the FTC. A subsequent legal battle took three years, wiping out his savings.
-via CBS Moneywatch, April 24, 2024
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Note:
A lot of people think that noncompete agreements are only a white-collar issue, but they absolutely affect blue-collar workers too, as you can see from the security guard anecdote.
In fact, one in six food and service workers are bound by noncompete agreements. That's right - one in six food workers can't leave Burger King to work for Wendy's [hypothetical example], in the name of "trade secrets." (x, x, x)
Noncompete agreements also restrict workers in industries from tech and video games to neighborhood yoga studios. "The White House estimates that tens of millions of workers are subject to noncompete agreements, even in states like California where they're banned." (x, x, x)
The FTC estimates that the ban will lead to "the creation of 8,500 new businesses annually, an average annual pay increase of $524 for workers, lower health care costs, and as many as 29,000 more patents each year for the next decade." (x)
Clearer explanation of noncompete agreements below the cut.
Noncompete agreements can restrict workers from leaving for a better job or starting their own business.
Noncompetes often effectively coerce workers into staying in jobs they want to leave, and even force them to leave a profession or relocate.
Noncompetes can prevent workers from accepting higher-paying jobs, and even curtail the pay of workers not subject to them directly.
Of the more than 26,000 comments received by the FTC, more than 25,000 supported banning noncompetes.
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"Is social media designed to reward people for acting badly?
The answer is clearly yes, given that the reward structure on social media platforms relies on popularity, as indicated by the number of responses – likes and comments – a post receives from other users. Black-box algorithms then further amplify the spread of posts that have attracted attention.
Sharing widely read content, by itself, isn’t a problem. But it becomes a problem when attention-getting, controversial content is prioritized by design. Given the design of social media sites, users form habits to automatically share the most engaging information regardless of its accuracy and potential harm. Offensive statements, attacks on out groups and false news are amplified, and misinformation often spreads further and faster than the truth.
We are two social psychologists and a marketing scholar. Our research, presented at the 2023 Nobel Prize Summit, shows that social media actually has the ability to create user habits to share high-quality content. After a few tweaks to the reward structure of social media platforms, users begin to share information that is accurate and fact-based...
Re-targeting rewards
To investigate the effect of a new reward structure, we gave financial rewards to some users for sharing accurate content and not sharing misinformation. These financial rewards simulated the positive social feedback, such as likes, that users typically receive when they share content on platforms. In essence, we created a new reward structure based on accuracy instead of attention.
As on popular social media platforms, participants in our research learned what got rewarded by sharing information and observing the outcome, without being explicitly informed of the rewards beforehand. This means that the intervention did not change the users’ goals, just their online experiences. After the change in reward structure, participants shared significantly more content that was accurate. More remarkably, users continued to share accurate content even after we removed rewards for accuracy in a subsequent round of testing. These results show that users can be given incentives to share accurate information as a matter of habit.
A different group of users received rewards for sharing misinformation and for not sharing accurate content. Surprisingly, their sharing most resembled that of users who shared news as they normally would, without any financial reward. The striking similarity between these groups reveals that social media platforms encourage users to share attention-getting content that engages others at the expense of accuracy and safety...
Doing right and doing well
Our approach, using the existing rewards on social media to create incentives for accuracy, tackles misinformation spread without significantly disrupting the sites’ business model. This has the additional advantage of altering rewards instead of introducing content restrictions, which are often controversial and costly in financial and human terms.
Implementing our proposed reward system for news sharing carries minimal costs and can be easily integrated into existing platforms. The key idea is to provide users with rewards in the form of social recognition when they share accurate news content. This can be achieved by introducing response buttons to indicate trust and accuracy. By incorporating social recognition for accurate content, algorithms that amplify popular content can leverage crowdsourcing to identify and amplify truthful information.
Both sides of the political aisle now agree that social media has challenges, and our data pinpoints the root of the problem: the design of social media platforms."
And here's the video of one of the scientsts presenting this research at the Nobel Prize Summit!
-Article via The Conversation, August 1, 2023. Video via the Nobel Prize's official Youtube channel, Nobel Prize, posted May 31, 2023.
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