George Orwell’s 1984 features a tyrannical government’s tool called doublethink, which inverts the meaning of concepts to enhance the government’s power to stifle freedom. One infamous example of this “Newspeak,” the fictional language of Oceania, 1984’s totalitarian superstate, is the slogan “Freedom is Slavery.”
Washington Post columnist Jennifer Rubin apparently has her own version of doublethink. In a recent column, Distinguished pol of the week: A champion of free markets the GOP should embrace, Rubin defended a proposed Federal Trade Commission rule legally banning private non-compete clauses in private contracts as a win for free markets:
Lina M. Khan, head of the Federal Trade Commission, is demonstrating a commitment to competitiveness and free markets that even Republicans should embrace. The most recent example: the FTC’s proposal this past week to do away with noncompete agreements.
Such agreements prevent workers from going to work for a competing employer for months or even years. As the FTC explained in a statement, this is a "widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.” The release added: “By stopping this practice, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.”
The proposed rule is far-reaching. The FTC explains: “The proposed rule would apply to independent contractors and anyone who works for an employer, whether paid or unpaid. It would also require employers to rescind existing noncompetes and actively inform workers that they are no longer in effect.” [My emphasis]
It’s far-reaching, alright. These employment agreements are voluntary contracts between private employers and employees. A government ban is government coercion. It is tyranny. If the government can impose this rule, what feature of private contracts can’t it ban, or dictate, on vague justifications such as fighting “exploitation,” raising wages, advancing innovation, or supporting entrepreneurialism? Based on this “far-reaching” attack on freedom of contract and association, what limiting principle is left to reign in the government's control of private economic contracts?
As David McGarry writes for Reason in The FTC Wants To Outlaw Noncompete Clauses, but Does It Have the Authority?, “If it can survive legal challenges, the FTC's ban on noncompetes would have a massive impact on the rights of employers and workers.” [My emphasis]
Indeed—a negative impact, I would stress. Even worse, as McGarry points out, and as is announced in the FTC press release included in Rubin’s column, the rule would be retroactive, rescinding non-compete clauses in pre-existing contracts agreed to when noncompete clauses were legal. This is ex-post-facto law, a gift to any aspiring tyrant and a blatant violation of the U.S. Constitution. What can be more anti-free market than the ability of government regulators to declare all private contracts as subject to being made unlawful on the whim of any bureaucrat at any time in the future? Where is the rule of law that free markets depend upon for their very existence? The FTC rule does not, contrary to Rubin’s assertion, protect “a fundamental principle of free-market capitalism: the right to contract that both an employer and employee can agree to.” It is a trojan horse that destroys it.
True, non-compete clauses can be problematic. In one report, I read of a case where an employee was fired due to a recession. The non-compete agreement blocked him from some job opportunities offered by competitors, even though leaving his job was not his choice. But as McGarry pointed out, an employee could sue if he thinks the clause was abused. On the other hand, as McGarry and others have pointed out, without non-compete agreements, employees' opportunities to advance career-wise can be severely restricted, as without non-competes companies become more leery of sharing sensitive company information with employees they are not absolutely sure are strictly loyal, hampering advancements to higher-level job openings within the company. As McGarry points out,
Employers and employees weigh many kinds of benefits and drawbacks when considering whether to sign a contract—monetary and otherwise. Fully banning non compete clauses may help some, but will undoubtedly wreak unanticipated havoc on many others.
"With all due respect to the majority, I am dubious that three unelected technocrats have somehow hit upon the right way to think about non-competes, and that all the preceding legal minds to examine this issue have gotten it wrong," Wilson wrote [FTC Commissioner Christine Wilson is the lone dissenter on the new policy.]
But the bottom line is, these are private transactions. Private voluntary employment agreements that don’t involve fraud or criminal actions are none of the government’s business.
Rubin might want to ask herself, “What does the ‘free’ in free market actually mean?” Contrary to Rubin’s doublethink, “free” does not mean an FTC ban on non-compete agreements. Put simply, it means the absence of government coercion in private economic transactions. It means to leave law-abiding, rights-respecting economic activity free of government coercion. The proposed FTC rule is the very essence of government coercion, and thus the very antithesis of a free market.
Related Reading:
Gay Marriage, Freedom of Association, and Equal Protection of the Law
Gay Marriage: The Right to Voluntary Contract, Not to Coercive “Contract”
The Right to Discriminate is About Contract, Not Religion
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