Change For Free

Charles Lambkin | Noncompetes | Factoids | Elsewhere | Endnotes

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Quote of the Moment

Executives want culture change while keeping the existing power dynamics that actually generate culture unchanged. In other words, they want culture change for free. It doesn't work that way.

| Charles Lambdin, Culture Isn’t Talk

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Noncompetes

The U.S Federal Trade Commission (FTC) has ruled that noncompetes — the contractual agreements that limit an employee’s ability to quit and immediately work for another employer — are an ‘unfair method of competition’.

Peter Coy of the New York Times, in The Mostly Persuasive Logic Behind the New Ban on Noncompetes, despite the title of his commentary, comes out largely in favor of the move.

In one paragraph, Coy simply reports the clear negatives driving the FTC to block noncompetes for the rank-and-file US worker:

For 99 percent of the American work force, the F.T.C. said, requiring workers to sign noncompete agreements as a condition of employment is “coercive and exploitative conduct”.

For those who make more than $151,164 per year and are in a 'policy-making position' there are different considerations. The FTC looks to the damage to the markets and those that depend on them that arise from the ‘bilateral surplus’ built into senior executives and companies making deals to limit company and executive freedom to part ways. The FTC asserts this is bad for everyone else, and so is banning noncompetes for the good of society, going forward. Like second-hand smoke.

Coy, again:

The strongest evidence against noncompete agreements is that Silicon Valley has thrived even though — or maybe even partly because — the state of California has long banned noncompete agreements in most circumstances, under a law passed in 1872. The prohibition does not seem to have discouraged companies from sharing valuable inside information with employees who might leave. And it has enabled the germination of ideas as people flit from company to company like pollinating honeybees.

I’m with the FTC: empirical results are best.

Even if the F.T.C. wins on the legality of its rule, enforcing it is going to be tricky. Let’s say a company gets rid of its noncompete clause, but it imposes a nondisclosure agreement that’s so broad and strict that it has the same functional effect of preventing someone from taking a job elsewhere. According to the F.T.C., “such a term is a noncompete clause under the final rule.”

Coy seems to think that there will be a lot of lawsuits before this settles into a new pattern of work, based on established case law, and that’s a negative. But, Peter, it’s only corporations and lawyers — and the U.S. Chamber of Congress— yelling that this is a bad idea.

In FTC Bans Worker Noncompete Clauses, J. Edward Moreno takes a different tack, quoting Lina Khan’s economic estimates on what noncompetes actually cost:

The FTC has moved to bar noncompetes, 'contracts known as noncompetes, which prevent workers from leaving for a competitor for a certain amount of time, in most circumstances.

Noncompetes cover about 30 million U.S. workers, the trade commission said, in a variety of jobs that include TV news producers, hairdressers, corporate executives and computer engineers.

[Lina Khan] estimated the decision would lead to the creation of 8,500 start-ups in a year and up to $488 billion in increased wages for workers over the next decade.

That’s a lot of unrealized economic impact.

Employers have argued that noncompete contracts provide an incentive to invest in employees — because they ensure that the worker won’t leave to join a competitor. Unions, including the A.F.L.-C.I.O. and the Service Employees International Union, have supported the F.T.C.’s move.

Here in New York, Kathy Hochul once again demonstrates she not-quite-a-Democrat:

Some states, including California and Oregon, have moved to restrict noncompetes on their own.

In December, Gov. Kathy Hochul of New York vetoed a bill that would have banned noncompetes in the state. She said the bill should have been narrower and apply only to low-wage workers. Wall Street staunchly opposed the legislation, which the State Legislature’s Democratic majority passed.

Why would she do that?

Workers in finance and professional services are the most likely to have noncompete contracts, at a rate of nearly 20 percent.

So Wall Street and large consulting firms — which New York is crawling with — told her to vote no. But at least she hasn’t said she’ll sue to block the ruling, although we should expect Governors in right-to-work states to do so.

Let’s not forget the key idea behind all this:

Studies have shown that noncompetes suppress wages because switching jobs is the most efficient way workers can increase how much they make.

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Factoids

High-Amenity Offices

Office-Loan Defaults Near Historic Levels With Billions on the Line: Over $38 billion of U.S. office buildings face loan defaults, foreclosures or other forms of distress, the highest amount since 2012

| Peter Grant

That article is mostly focused on commercial real estate firms investing in ‘high-amenity offices’ to lure companies to rent. Meanwhile, older buildings (>15 years old) are being sold at steep discounts. The Donut-Effect continues to hollow out downtown real estate. (see Reverberations of the Donut Effect, and Aftershocks of the Donut Effect.)

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Since the pandemic, the return to office — at least for a few days out of the week — has gained momentum. With some companies mandating attendance, 90% of Fortune 100 employees work at hybrid or fully in-office employers, while only 1.4% work at fully remote companies, according to JLL. Of the Fortune 100 companies, the average weekly attendance requirement is now roughly 3 days.

| Rocio Fabbro ooches in a mention of RTO numbers in a piece dedicated to 'highly amenity offices'.

Engagement

Continuing a downward trend since 2020, the percentage of U.S. employees who are engaged at work drops to 30%, marking the lowest point in over a decade. This significant reduction in workplace engagement translates to approximately 4.8 million fewer U.S. employees feeling engaged in their work as of early 2024.

| Gallup

Something’s very, very wrong.

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Elsewhere

Unpassioning

Read a great piece by

Anna Brones

, which is obliquely work related: she related how — after years of deep involvement in the world of food and cooking — articles, a cook book, etc. — her passion died. But now, it seems to be returning:

Cooking Burnout

In an economy where we are commodifying our creative selves to eke out an independent living, work pressures can unpassion our passions into dry husks.

I was reminded of Rebecca Jenning’s recent Everyone’s a sellout now, where she wrote:

A society made up of human beings who have turned themselves into small businesses is basically the logical endpoint of free market capitalism, anyway. To achieve the current iteration of the American dream, you’ve got to shout into the digital void and tell everyone how great you are. All that matters is how many people believe you.

Are LLMs more like Refrigerators, or lSpreadsheets?

The brilliant Lee Bryant has a new post that poses incisive and insightful questions (and hypotheses) about AI LLMs.

From prompt whispering to model sommeliers: how best to think about the ‘atomic’ nature of LLMs in the AI evolution story?

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Endnotes

Want to optimise your digital platforms and your organisation's digital experience to improve internal communication, collaboration and organisational learning? Get yourselves to "Social Now 2024: Realising the value of your digital workplace". 16 & 17 May, in Lisbon, Portugal.

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