Lina Hahn’s plan to free American workers
“I doubt that the three unelected technocrats somehow found the right way to think about non-competition and that all previous lawyers who have studied this issue have been wrong,” she writes as an unelected technocrat. The US Chamber of Commerce calls the proposed change “wrongful act” and argues that getting rid of non-competition suppress innovation. Why would a company invest in innovation or even train employees in special skills when these ungrateful people can take that knowledge out the door?
Khan dryly points out that California companies, despite the state’s ban on non-competition, are quite successful at innovating. You know… Apple, Disney, Google, the guy who invented AeroPress. And she has a message for those businesses that will now face the daunting prospect of losing those points if the FTC rule becomes official. “At the end of the day, companies have to invest in workers if they want to be successful,” she says. “You keep talent by actually competing by offering them higher wages, better benefits, better training and investment opportunities. This is how you maintain a high retention rate rather than locking workers in place.”
As for the fear of workers stealing intellectual property, Khan says her rule won’t affect trade secret litigation, although she doesn’t want trade secret restrictions to be interpreted so broadly that they become a shady form of non-competition.
Although the non-compete rule is only at the proposal stage, Khan believes her agency has presented a fairly convincing case. “I mean, it’s the 218 page rule!” she says. “Nearly half of them are very, very thorough analyzes of empirical research.” But she also urges anyone with an opinion or relevant evidence to speak up during the 60-day comment period ending March 10, and says the agency will review everything with an open mind. But with a 3-1 Democratic panel majority, it’s fair to assume the agency will get its rule in one form or another.
I ask Khan if she views this rule as her own natural experiment, testing how much the FTC can get away with before the Supreme Court hits her in the knuckles. Last June court sentenced that the EPA has overstepped its bounds in carbon regulation. Agreeing with the majority opinion, Justice Neil Gorsuch promoted the doctrine that agencies could not pass sweeping new rules unless Congress explicitly approved them.
Khan responds by referring to Congress’ original intent for the FTC to ensure competition. “This authority, especially in recent decades, has not been used as much and I think it is a parody,” she says. “We, as enforcers, have a duty to enforce the laws that Congress has assigned us. I think we have a pretty clear mandate, a pretty clear precedent. If we have legal problems, we will be ready to fully defend ourselves.”
Khan’s arguments against non-competition provisions are compelling. But the five, perhaps six, current Supreme Court justices aren’t used to blowing kisses to workers, big or small. Instead, they seem to take pleasure in directing phlegm onto the faces of workers who to stand for your rights-or regulators who want to expand these rights. If they undo Khan’s reign, she’ll have as little power to restore it as those Prudential guards who are trapped in their miserable jobs due to the non-compete clauses.