Your non-compete clause is probably illegal (with WA Attorney General Bob Ferguson)

Episode Summary

Executive Summary: The episode examines how non-compete and no-poach agreements suppress worker mobility, wages, and bargaining power, especially for low-wage employees. Washington AG Bob Ferguson explains how his office dismantled no-poach clauses nationwide and helped reshape state and federal attention toward banning or restricting these practices as illegal anti-competitive conduct.

Main Topics: Myths vs. reality about non-competes (Priority: 5/5): The hosts and Ferguson argue that non-competes are not limited to executives with trade secrets; they affect millions of workers across industries and salaries, including low-wage service workers. No-poach agreements as hidden labor market restraints (Priority: 5/5): The discussion explains how franchise contracts can prevent workers from moving between locations of the same brand, blocking raises, promotions, and shorter commutes without workers even knowing it. Washington State enforcement strategy (Priority: 5/5): Ferguson details how his office subpoenaed franchise agreements, identified widespread no-poach clauses, and forced nearly all major franchisors to remove them nationwide. Non-competes and wage suppression (Priority: 4/5): The episode frames non-competes as a tool that lowers employee leverage, reduces labor-market competition, and contributes to stagnant wages over decades. Federal and state policy momentum (Priority: 4/5): The conversation covers Washington’s legislative limits on non-competes, potential FTC rulemaking, and the Biden administration’s stated interest in restricting these practices. Broader worker-protection agenda (Priority: 3/5): Ferguson describes other areas of AG authority, including wage theft, unsafe working conditions, and contract restrictions that harm workers, emphasizing the role of state enforcement.

Key Arguments: Non-competes are far more common than people think and bind millions of workers, not just executives. Low-wage workers often sign non-competes despite having no access to trade secrets, making the practice a wage-suppression tool rather than a genuine protection of business interests. No-poach agreements between franchisors and franchisees function like collusion by preventing workers from moving between competing locations. State attorneys general can use subpoena power and litigation threats to eliminate unlawful restrictive clauses nationwide. Washington’s legislative cap on non-competes and enforcement actions against no-poach agreements show that meaningful reform is possible. Restricting anti-competitive labor practices benefits not only workers but also consumers by increasing market competition and forcing firms to improve wages and retention. The FTC and federal administration have authority and interest in narrowing or eliminating these practices, suggesting federal reform is feasible. Wage theft and other worker abuses are part of the same broader power imbalance, and AG offices can serve as critical enforcers when workers lack resources to sue.

Data Points: Workers bound by non-competes in the U.S.: 30 million - Ferguson cites Treasury Department data showing the scale of non-compete coverage. Share of U.S. workers bound by non-competes: Nearly 1 in 5 - Used to dispel the myth that non-competes affect only a tiny elite. Workers who will at some point be bound by non-competes: About 40% - Ferguson says many Americans encounter non-competes during their careers. Workers making under $20,000/year covered by non-competes: About 12% - Highlights how low-wage workers are directly affected. Typical non-compete duration: 1.5 to 2 years - Described as a common restriction period after accepting employment. Washington franchisors targeted by the AG investigation: Nearly 300 - Companies whose franchise agreements were reviewed for no-poach clauses. Corporate franchisors that signed agreements to end no-poach clauses: 237 - Nationwide changes secured after Ferguson’s office intervened. Washington locations affected: 4,700 - Franchise locations in Washington covered by the no-poach eliminations. Locations around the country affected: Nearly 200,000 - Estimated footprint of the nationwide agreement changes. Jersey Mike's settlement payment: $150,000 - The one franchise company that resisted and was sued before agreeing to comply. Washington non-compete income threshold: Under $100,000/year - The state law broadly restricts non-competes below this earnings level. Estimated national wage theft problem: $70 billion/year - Used to illustrate the scale of broader worker exploitation.

Pivotal Quotes: "It has just been this fantastic way for companies to steal power, to steal wages from their employees." — Nick Hanauer: Opening critique of non-competes as a systemic labor-market control mechanism. "About 30 million people, nearly one out of every five workers in the United States, are currently bound by non-competes." — Bob Ferguson: Ferguson quantifies how widespread the practice is and challenges the elite-executive myth. "We believe they are unlawful." — Bob Ferguson: Ferguson’s office conclusion about no-poach agreements after reviewing franchise contracts.

Implications: The episode suggests aggressive state enforcement, FTC action, and legislative reform can materially improve labor mobility and wages. For workers, it signals that these clauses may be challengeable; for employers, it warns that suppressing competition in labor markets may be unlawful and unsustainable.