Online Signature Licitness for Non-Compete Agreement in United States

How to eSign a document: online signature licitness for Non-Compete Agreement in United States

- [Narrator] Nearly $300 billion. That's how much money the Federal Trade Commission estimates workers could be missing out on each year because of noncompete agreements. - Interestingly, we see wages depress, not just for people who are directly subject to noncompetes, but even for workers that are not. - [Narrator] A new proposal from the FTC would ban noncompete clauses at the federal level, following states that have already made them unenforceable. - The FTC thinks this is gonna be really good for workers. It will make companies have to think differently, maybe more creatively, about how they're gonna retain people. - [Narrator] Here's what a federal ban on noncompetes could mean for workers and businesses, and why it faces challenges. Noncompetes typically restrict workers from jumping to competitors after they leave a company. For example, this is a noncompete clause for Amazon from 2018. It specifies an amount of time that workers have to wait before moving to a competitor. Others can also bar people from working in a certain geographic area. - Employers include these in contracts because they want to protect confidential information. They wanna protect trade secrets, proprietary information. That might be everything from a scientific formula to a list of customers. - [Narrator] The FTC estimates that almost 20% of workers in the US are affected by noncompete agreements. That includes people across industries and positions, from business executives to lower wage workers, who likely have less access to proprietary information. Regulation for enforcing them right now is entirely up to states, but the Biden administration has pushed for federal regulation. - Workers should be free to take a better job if someone offers it. - [Narrator] The FTC says that noncompete clauses hurt the US labor market and that eliminating them would give workers more mobility in their industry, which could increase wages. - Noncompetes mean that somebody can't go to another company where they might be offered a higher salary or a higher wage. It also means that they can't go and get an offer from another company and come back to their employer and say, "Hey," you know, "here's my offer. Will you meet it?" It doesn't give them the means to negotiate for higher pay. - [Narrator] After a ban on noncompete clauses for hourly workers in Oregon in 2008, wages increased by 2 to 3% on average. Something similar happened in Hawaii in 2012 when wages for new tech hires went up by 4% after the state introduced a ban in the sector. Proponents of a federal ban say it could also promote entrepreneurship by freeing employees up to join a new business or start their own. - The FTC's idea is that by giving people the freedom to do that without these restrictions, it will be both, you know, good for individuals and also good for the economy. - [Narrator] But it's a little more complicated for companies. On one hand, the potential ban could give companies a broader hiring pool and more chances to bring on talent, but opponents of the ban also say it offers less protection for trade secrets, which aren't fully covered by laws. - When I've asked lawyers about this, they say, "Yeah, but it's tricky because trade secrets laws you can only impose after the fact, you can't monitor and track what they're telling other people or what they're using." So, you know, they say that noncompetes really are the only way they they can know that their information is being protected. - [Narrator] If adopted, companies would need to rescind these clauses from any contract and inform employees past and present. The US Chamber of Commerce says that the FTC's proposed ban is blatantly unlawful. - No matter what rule the FTC comes out with, they will probably be challenged in court about the parameters or even whether they have the authority to create a rule like this. - [Narrator] The FTC says it does. - We are confident that the text and instructor of the FTC Act gives us clear authority to do this. - [Narrator] But the proposal still has some time before it gets to that point. It has to go through 60 days of public comment first, where anyone can offer feedback. Then the agency can formally make the proposed rule a regulation. - At the moment, it's very broad and it basically applies to any noncompete. The final rule may be different from them. They might modify some of it. - [Narrator] The public comment period ends March 10th.