During the pandemic, Jeff Lohse experienced an all-too-common phenomenon. He was furloughed from his job.
Lohse worked for Logic Systems Sound and Lighting, a company that did audio and visual work at the sorts of big events, including concerts, that were canceled when COVID-19 hit. Lohse, a sales manager, applied for unemployment, which he received for a couple of weeks. By July 2020, he had a new job with a competitor that snapped him up.
The job lasted three days. That’s because Lohse and his new employer received an email explaining that Lohse was in violation of a noncompete agreement.
“I didn’t even realize I had a noncompete,†he says.
Finding out he couldn’t work in the industry he had succeeded in for more than 15 years “turned my world upside down.â€
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Lohse is one of in the U.S. whose freedom to work is handcuffed by noncompete clauses. Once limited to wealthy executives, the clauses have become so prevalent as to affect even minimum wage jobs — leaving 1 in 5 American workers with no recourse when they want to seek better employment, even after being laid off.
That’s why the Federal Trade Commission, in response to an executive order issued by President Joe Biden in 2021, that would deem most noncompete clauses illegal. The comment period on the proposed rule ends March 10. The rule could become final by the end of the year.
“For decades, I’ve fought for the notion that if your employer wants to keep you, they need to make it worth your while with good pay and benefits,†Biden said in a tweet after the FTC announced its proposed rule. “Today’s FTC announcement to limit non-compete agreements is a huge win for workers.â€
Of course, even if the rule passes and becomes federal law, and overcomes expected lawsuits, none of that will help Lohse. His noncompete clause banned him from working in the audio-visual industry for three years, anywhere in the Midwest.
After finding another new job, and once again being served notice that he couldn’t work, Lohse took matters into his own hands. In December 2020, he sued Logic Systems, asking a judge to declare his noncompete invalid. He and his attorney tried to no avail to negotiate a settlement in which Lohse would agree not to reach out to any of his old customers.
In April 2021, Logic Systems counter-sued, seeking to extend the noncompete and collect attorney’s fees. This is one of the more onerous elements of Missouri’s version of a noncompete law, says Mary Anne Sedey, who is Lohse’s attorney. The collection of attorney’s fees can have a chilling effect on workers trying to battle against noncompete clauses.
“It becomes enormous leverage for the employer,†Sedey says.
Bryan Kaemmerer, an attorney for Logic Systems, declined comment on the lawsuit. But he does have opinions on the proposed FTC rule, which he says is too sweeping and likely exceeds the FTC’s authority.
“The proposed rule represents an unprecedented foray by the federal government into an area of the law that has traditionally been left up to the states for decades,†says Kaemmerer, an employment attorney who says he’s handled cases on both sides of the noncompete issue.
He believes there is a happy medium where the FTC could end up. Kaemmerer says he agrees that “people should generally be able to move freely amongst jobs to make a living for their families.â€
One of the reasons the FTC, and Biden, want to get rid of noncompetes is that wages often go up in states that have limited their use. The playing field shifts from employer to worker, giving workers who have more job freedom the ability to demand better pay. The FTC has estimated that getting rid of most noncompete clauses would increase wages by about $300 billion annually across the country. The prediction is based partly on studies in Hawaii, Oregon and elsewhere that showed wages increased in specific industries after the states limited noncompete clauses.
With his lawsuit pending, Lohse has found new employment again, with a company he doesn’t believe competes with his former employer. But he is worried this job might not last either.
“Wherever I end up, they seem to be going after them also,†Lohse said. “I’m just trying to work.â€