US regulators go after non-competes

This is an audio transcript of the FT News Briefing podcast episode: ‘US regulators go after non-competes’

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, February 14th, and this is your FT News Briefing.

[MUSIC PLAYING]

US regulators may make non-compete agreements a thing of the past. And Nigeria is running out of cash like there isn’t enough of the actual paper money around. I’m Marc Filippino and here’s the news you need to start your day.

[MUSIC PLAYING]

Nigerians are in a cash crunch. The central bank announced a plan late last year to replace its largest currency notes. We’re talking about the 200 notes, the 500 notes and the 1,000 notes. Officials said the new notes would cut down on counterfeiting and help the cash-oriented economy move towards electronic payments. Well, first, they didn’t print enough of the notes. Plus, they didn’t give people enough time for the swap. So in a country where cash is still king, chaos ensued.

Aanu Adeoye
Many banks were shut down because fights kept breaking out in banking halls because the banks did not have enough cash to supply to people who are turning in the old notes.

Marc Filippino
That’s our west Africa correspondent, Aanu Adeoye.

Aanu Adeoye
I went to a bank that was so full that the bank provided a tent outside to protect people who are waiting in the scorching sun to wait. Yeah, so it’s been chaotic. It’s put on extra cost on people’s daily lives at a time when the economy is not doing well to begin with. And it’s kind of maddening for a lot of people that they cannot withdraw their own money.

Marc Filippino
Nigeria’s Supreme Court even stepped in and extended the deadline for when the old notes would still be legal. That is tomorrow.

Aanu Adeoye
But businesses have stopped accepting those old notes, right? I spoke to an analyst who said, look, the Nigerian authorities have kind of broken this social contract. And so people are rejecting the old notes because they don’t have confidence that if they collect the old notes as a business or they as an individual and they take it to the bank, they will be able to get new notes out of the bank.

Marc Filippino
Adding to the mess, there’s an upcoming presidential and parliamentary election. And this currency issue has become a political football.

Aanu Adeoye
Yeah, I mean, it takes only two minutes for anything to become a political football in this country. But depending on who you ask, right? The main, and we’ve spoken to analysts who say, look, the main purpose for bringing in the new notes this close to an election in the first instance was to stop politicians from buying votes. And that usually requires a huge amount of cash that has been stockpiled for that particular operation. And if you changing the old notes in such a short span of time and you don’t replace it quickly, that means that there are politicians whose notes become useless.

Marc Filippino
Aanu says the lead candidates all have their theories about what’s behind the botched currency swap.

Aanu Adeoye
The candidate of the ruling All Progressives Congress, Bola Tinubu, who is an ally of the president, has alleged that there are some people who are trying to use this controversy to sabotage his campaign. You’ve seen governors of the same party speaking to the president and saying that, look, if people cannot get enough cash, they will blame our party for this chaotic rollout and we are going to lose at the polls. And I think the major thing that’s come out of all of this is it’s just showing us that there’s growing tensions within the ruling party as they gear up for these crucial elections in a couple of weeks.

Marc Filippino
Aanu Adeoye is the FT’s west Africa correspondent.

[MUSIC PLAYING]

US regulators recently proposed a ban on non-compete agreements. These are clauses in a contract that prevent someone from jumping to a rival company for a certain amount of time after quitting. They’re usually associated with executives who could take trade secrets with them. But non-competes have become so pervasive they now affect one in five American workers. People like 59-year-old David Wagner, he’s a medical equipment technician in Washington state.

David Wagner
I’ve been in the field 20 plus years. And it’s hard because I feel like with the no-compete, you’re held captive and you feel like they own you. And you can’t go somewhere to better yourself and make more money for your family doing what you do and what you know best.

Marc Filippino
Wagner said he was fired last month. He’s barred from working in his field for a year. So he’s joined a class-action lawsuit that aims to nullify non-competes for workers below a certain salary. Meanwhile, the Federal Trade Commission wants to ban non-competes altogether. I’m joined now by the FT’s Stefania Palma, who’s been reporting on this. Hey, Stefania.

Stefania Palma
Hi, Marc.

Marc Filippino
OK, so why have these clauses become so common?

Stefania Palma
So experts are trying to answer this question as to why this has grown so much, especially for lower wage workers. And there are a different set of answers. It may be because of actually a drop in unionisation. Also, the fact that there’s been a jump also in how easy it is for companies to access sort of pre-packaged non-competes online that they can just slip into employment contracts. And then historically, there hasn’t really been much oversight across the economy for this type of practice. So companies have just been using these types of agreements, which obviously can be quite advantageous for them because it tends to especially for lower wage workers, they tend to be locked into these jobs because they’re the ones who may not afford to negotiate with their employers. They may not afford to sort of leave their jobs and then wait the agreement out or change location, because oftentimes these agreements also have a geographical limit.

Marc Filippino
So how have businesses been responding to the FTC considering a ban on non-compete?

Stefania Palma
There’s been a massive backlash from the business world, as we could expect. They argue that the proposal goes way too far, that it would increase costs for them, that the risk of trade secrets leaking would jump. And some lawyers who have represented sort of corporate clients also argue that taking away the non-compete as a tool to protect trade secrets would mean that we will likely see a jump in trade secret legal challenges, which actually are far more complex and therefore would increase costs.

Marc Filippino
So why is the FTC going after non-compete so hard right now?

Stefania Palma
Interestingly, the issue of non-competes has been discussed for years now, both sort of at the White House and at these agencies, so it has been on people’s radar. The big difference, obviously, of course, is that now, especially at the FTC under Lina Khan, the chair of the FTC, a very progressive official when it comes to antitrust, she basically has now finally took a very blunt and bold step in terms of trying to tackle this.

Marc Filippino
Yeah, here she is on CNBC Business News saying that non-competes aren’t just bad for workers . . . 

Lina Khan
On net, this can be bad for competition in ways that we should be concerned about regardless. At the FTC, sometimes we hear from founders who were able to secure capital, they were looking to enter a market, they were able to build the factory. But at the end of the day, they weren’t able to build in scale because all the relevant workers, the talent was locked up.

Marc Filippino
OK Stefania, so what happens next?

Stefania Palma
So after the FTC proposes a rule, there is now a public comment period and then the FTC will consider whether to implement some of the comments that have come through and then will vote on the proposal again before final implementation. But honestly, because sort of the commissioners who voted for the proposal in the first place, there is a majority of supports. It’s unlikely basically that the vote will be different second time around.

Marc Filippino
Stefania Palma is the FT’s US legal and enforcement correspondent. Thanks, Stefania.

Stefania Palma
Thank you.

[MUSIC PLAYING]

Marc Filippino
Before we go, it’s been almost one year since Moscow launched a full-scale invasion of Ukraine. And many are wondering how and when it will all end. Next week, FT correspondents and special guests will hold a webinar on these very questions. This is a subscriber-only event and you can sign up at ft.com/ukraine-event. We’ll also have that link in the show notes.

[MUSIC PLAYING]

You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

[MUSIC PLAYING]