U.S. Bans Non-Competes, Promising Better Working Conditions in Hollywood
The Federal Trade Commission (FTC) has taken a bold step to improve working conditions in Hollywood by banning non-compete clauses. These clauses typically prevent workers from taking a new job from a rival or starting a new business in the same field for a certain amount of time after leaving a company.
The ban, which was approved by a 3-to-2 vote on Tuesday, is expected to become law in roughly four months. Companies that violate the ban will be required to provide notice to workers who are bound by non-compete clauses that they cannot enforce those terms. However, clauses affecting senior executives can remain in effect, though employers will be prohibited from imposing new non-competes.
Impact on Hollywood
The ban on non-competes is expected to have a significant impact on the entertainment industry, where these clauses have been widely used to suppress wages. SAG-AFTRA, the union representing actors and performers, has argued that non-competes are often used to prevent workers from earning higher salaries. The union cited a study that found that prohibiting non-competes could help level pay disparities between men and women, as women are more likely to honor these provisions.
Challenges to the Ban
While the ban is a major victory for workers, it has also been met with legal challenges. Shortly after the measure passed, a tax services and software provider sued to block the ban, claiming that it will place an “extraordinary burden” on businesses seeking to protect their intellectual property and retain top talent. The U.S. Chamber of Commerce has also said that it will sue, calling the ban a “power grab” that will “undermine American businesses’ ability to remain competitive.”
Workarounds to the Ban
Despite the ban, companies may still find ways to restrict workers from joining competitors. These include fixed-term employment agreements, which allow employers to sue workers for breach of contract if they leave before the expiration of the term, and non-solicitation clauses, which bar exiting workers from urging clients or other employees to join them in their next endeavor.
Future Implications
The ban on non-competes could have far-reaching implications for the entertainment industry. It could lead to increased competition among companies for top talent, higher wages for workers, and reduced pay disparities between men and women. The ban could also make it easier for workers to start their own businesses and pursue new opportunities.
It remains to be seen how the ban will be implemented and enforced. However, it is clear that the FTC is committed to protecting workers’ rights and promoting competition in the labor market.
