    [Senate Hearing 118-564]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-564

                   BANNING NONCOMPETE AGREEMENTS: BENEFITS
                   FOR WORKERS, BUSINESSES, AND THE ECONOMY

    =======================================================================

                                    HEARING

                                   before the

                                SUBCOMMITTEE ON
                                ECONOMIC POLICY

                                     of the

                                  COMMITTEE ON
                      BANKING, HOUSING, AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

             EXAMINING BANNING NONCOMPETE AGREEMENTS AND HOW THAT
               CAN BENEFIT WORKERS, BUSINESSES, AND OUR ECONOMY

                                   __________

                                 JULY 30, 2024
                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https://www.govinfo.gov/

                                    ______

                       U.S. GOVERNMENT PUBLISHING OFFICE

    58-712 PDF                 WASHINGTON : 2025

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                           SHERROD BROWN, Ohio, Chair
    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE ROUNDS, South Dakota
    MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
    CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                J.D. VANCE, Ohio
    RAPHAEL G. WARNOCK, Georgia          KATIE BOYD BRITT, Alabama
    JOHN FETTERMAN, Pennsylvania         KEVIN CRAMER, North Dakota
    LAPHONZA R. BUTLER, California       STEVE DAINES, Montana

                         Laura Swanson, Staff Director
                   Lila Nieves-Lee, Republican Staff Director

                          Cameron Ricker, Chief Clerk
                          Shelvin Simmons, IT Director
                           Pat Lally, Assistant Clerk

                                     ______

                        Subcommittee on Economic Policy

                     ELIZABETH WARREN, Massachusetts, Chair
                    JOHN KENNEDY, Louisiana, Ranking Member
    JACK REED, Rhode Island              MIKE ROUNDS, South Dakota
    ROBERT MENENDEZ, New Jersey          THOM TILLIS, North Carolina
    CHRIS VAN HOLLEN, Maryland           CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                STEVE DAINES, Montana
    JOHN FETTERMAN, Pennsylvania

                  Harleen Gambhir, Subcommittee Staff Director
              Wesley Davis, Republican Subcommittee Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------

                             TUESDAY, JULY 30, 2024

                                                                       Page

    Opening statement of Chair Warren................................     1

    Opening statements, comments, or prepared statements of:
        Senator Kennedy..............................................     3

                                   WITNESSES

    Heidi Shierholz, President, Economic Policy Institute............     4
        Prepared statement...........................................    23
    R. James Toussaint, MD FAAOS, Orthopedic Surgeon.................     6
        Prepared statement...........................................    28
    Hayley Paige, Small Business Founder and Wedding Dress Designer..     8
        Prepared statement...........................................    30

                  Additional Material Supplied for the Record

    ``Advancing the American Workforce'', HRPA.......................    33
    Letter supporting the FTC ruling.................................    42
    Letter submitted by Engine.......................................    44
    Statement submitted by CLASP.....................................    65
    Letter submitted by SBM..........................................    69

                                     (iii)

                    BANNING  NONCOMPETE  AGREEMENTS: BENE-
                     FITS FOR WORKERS, BUSINESSES, AND THE
                     ECONOMY

                                  ----------

                             TUESDAY, JULY 30, 2024

                                   U.S. Senate,
      Committee on Banking, Housing, and Urban Affairs,
                               Subcommittee on Economic Policy,
                                                        Washington, DC.
        The Subcommittee met at 2:30 p.m., via Webex and in room
    538, Dirksen Senate Office Building, Hon. Elizabeth Warren,
    Chair of the Subcommittee, presiding.

              OPENING STATEMENT OF CHAIR ELIZABETH WARREN

        Chair Warren. This hearing will come to order.
        America is the land of opportunity. We hold tight to the
    idea that every American can work hard, develop skills and
    experience, and create new opportunities for themselves and
    their families to have a better job and to have a better life.
        But over the years, powerful corporate interests have
    worked to take that freedom away from America's workers. One of
    the ways they do this is through noncompete clauses. These are
    terms that are inserted into the fine print of contracts that
    prohibit workers from joining or starting a competing business.
        Now, currently, these agreements hold back about 30 million
    Americans, about one in five American workers. They affect
    workers from software engineers to doctors, to hair stylists,
    to doggie daycare workers.
        Noncompete clauses suppress wages; they prevent mobility,
    and they keep workers in dead-end jobs with no hope of moving
    up.
        They hurt the economy as a whole, slowing innovation and
    inhibiting new business formation, and ultimately, raising
    consumer prices.
        Noncompete clauses hurt all workers, but they have their
    worst impact on women, on non-White workers, and on workers
    with less education.
        These agreements are unfair and un-American, and they are
    on the plain face of it anticompetitive. The whole point of
    these agreements is to prevent businesses from having to
    compete for workers. It's like price-fixing, but for jobs.
        Bipartisan coalitions in Congress have supported
    restricting noncompete clauses. And that's why I was really
    pleased in April when the Federal Trade Commission finalized a
    new rule to protect more than 100 million workers by
    prohibiting employers from forcing their workers into
    noncompete agreements.
        This rule is another example of the Biden-Harris
    administration acting to rein-in corporate abuse and it makes
    lives better for ordinary Americans--from reducing abusive
    overdraft costs to ensuring workers get the overtime pay they
    deserve, to wiping out junk fees on airlines, concert tickets,
    hotels, and more.
        Now, with this rule, the FTC is doing exactly what Congress
    authorized it to do--prohibiting unfair methods of competition.
    This rule is incredibly popular. More than 90 percent of the
    comments that the FTC received on the rule were favorable. And
    it's no wonder; FTC analysis shows that it will increase
    workers' pay by an average of about $500 a year. It will cut
    health care costs by tens of billions of dollars over the next
    decade. The rule will unleash innovation and economic growth,
    helping create about 8,500 new businesses every year and
    resulting in tens of thousands of new patents. The FTC and the
    Biden-Harris administration deserve all the credit in the world
    for putting this rule in place.
        You heard me say it before and I will say it again: I
    believe in markets, competitive markets. This rulemakes sure
    that Americans can take their skills, their labor, and their
    willingness to work hard into that market and get the best
    possible pay and working conditions. That's how markets are
    supposed to work in a free country.
        So where are our Republican friends on this issue? Once
    again, instead of standing up for real competition, they are
    moving nearly in lockstep with the big corporations that hate
    these rules.
        Republicans in the House have introduced a Congressional
    Review Act Resolution to try to overturn the FTC's new
    noncompete rule. Of course, if it managed to pass the House and
    the Senate, President Biden would veto it.
        So opponents of the bill are now taking to the courts and
    they are getting President Trump's judges to intervene on this
    rule. The Chamber of Commerce and other corporate trade groups
    have gone court shopping to put the case before an extremist
    Trump-appointed judge in Texas, and they're hoping to get an
    extremist ruling next month to put the whole rule on hold.
        These lawsuits are the product of abuse of the justice
    system to try to stop the Biden-Harris administration from
    helping America's workers. The opponents of the rule are going
    so far that they are even trying to have the FTC, after all
    these years, have the FTC declared unconstitutional.
        This is not the first time that the Chamber of Commerce and
    other big money outfits have trotted out this playbook. This is
    what happens when big business thinks it can get whatever it
    wants from radical Trump judges. They use the courts to block
    the Biden-Harris administration from enacting commonsense rules
    that will help Americans and help our economy. We need to deal
    with this specific case on noncompete clauses, but we also need
    broader court reform to end these abuses.
        As this case in Texas moves forward, another judge in
    Pennsylvania has refused to strike down the FTC's noncompete
    rule. The Texas case should be resolved similarly. Any
    reasonable nonpartisan interpretation of the law would make it
    clear that Congress explicitly gave the FTC the authority to
    ban noncompetitive restraints of trade, including noncompete
    agreements that keep workers from looking for a better job.
        In today's hearing, we'll hear more about why the legal
    effort to roll back this rule is wrong and about how, once the
    rule is finally implemented, millions of workers will benefit.
        With that, I turn to my Ranking Member, Senator Kennedy,
    and ask him for his opening statement.

               OPENING STATEMENT OF SENATOR JOHN KENNEDY

        Senator Kennedy. Thank you, Madam Chair.
        Welcome to our witnesses.
        About 90 percent of my personal and political philosophy
    is: don't hurt anyone else unless you have to defend yourself.
    Don't take other people's stuff and leave me alone.
        I believe in free enterprise. I believe in markets. I
    believe in the ingenuity and the persistence of the American
    people--and of all people, humanity.
        Noncompete clauses are sort of like Senate bills--there are
    some good ones and there are some bad ones. Noncompete clauses,
    by their definition, are a restriction, operate as a
    restriction on both the employer and the employee. So from one
    perspective, they are restrictions on free enterprise.
        That doesn't mean that they are inappropriate in all cases.
    When it's necessary to protect business information; when it is
    necessary to protect trade secrets; when those agreements are
    negotiated by two parties of reasonably equal bargaining
    strength, there can be a place for them, for noncompete
    agreements.
        They can also be abused. I don't think it's appropriate
    for, for example, a fast-food restaurant--I don't know if this
    example even exists, but I've heard some people allege it, and
    shame on them if it's not true. But if it is true, I don't
    think a fast-food restauranteur should ask entry-level
    employees to sign a noncompete agreement. What's the point
    other than to restrict free enterprise? That makes no sense to
    me.
        I think it's also very important for us and for the courts
    to take a look at the bargaining strengths, relative bargaining
    strength of the parties. I don't believe in contracts of
    adhesion. I think that people ought to, all things being equal,
    ought to be able to address these issues with the same amount
    of leverage. Now, we live in the real world. I know that
    balance doesn't always exist, but it's something that we have
    to take a look at.
        Most State law of which I'm aware requires that noncompete
    agreements be reasonable. And courts, I think, at both the
    State--to some extent the Federal level, but generally it's a
    State issue--take a look at the length of the noncompete
    agreement. They look at the bargaining strength of the parties.
    They look at the terms, obviously. They look at what behavior
    is being restrained. Why is it necessary to restrain that
    behavior? What are the interests of the employee? What are the
    interests of the employer?
        And if they're reasonable and there's a legitimate purpose,
    I think in most cases they--and Mitt Romney said this--in many
    cases, they've been upheld.
        I'm going to stay as long as I can today. I would like to
    hear your testimony. I would like to ask you questions. We've
    got a lot going on. I think a vote has already been called and
    I'm going to have to go down and vote.
        But what my friend Senator Warren said in her opening
    statement, notwithstanding about Republicans, that's kind of
    this Republican's point of view about noncompete agreements.
        OK. Thank you.
        Chair Warren. Thank you, Senator Kennedy.
        And now I'd like to introduce our witnesses. First, we have
    Dr. Heidi Shierholz. Dr. Shierholz is the President of the
    Economic Policy Institute. She served as the Chief Economist at
    the U.S. Department of Labor during the Obama administration.
    Thank you for being here with us.
        Next is Dr. R. James Toussaint. Dr. Toussaint is an
    orthopedic surgeon who completed his medical training at NYU
    and Harvard University. He currently practices in Florida.
        I want to extend a very special thanks to Dr. Toussaint
    because he was one of the people who helped during the Boston
    Marathon bombing, and we're grateful for that help.
        I also want to extend another very special thank you. I
    know that you were very helpful following the earthquake in
    Haiti in 2010. So thank you very much for your work.
        And our third witness is Ms. Hayley Paige. Ms. Paige is a
    wedding and shoe designer who also resides in Florida. She rose
    to fame designing Hayley Paige dresses sold across the country
    and starring on the TLC show ``Say Yes to the Dress'' before
    being slammed with a noncompete that she only very recently
    beat in court. So thank you very much for being here.
        So I'm going to start. We'll do witness statements, and
    then we'll go to our questions.
        Dr. Shierholz, if I could start with you, please.

          STATEMENT OF HEIDI SHIERHOLZ, PRESIDENT, ECONOMIC
                          POLICY INSTITUTE

        Ms. Shierholz. Thank you very much. Chair Warren, Ranking
    Member Kennedy, other Members of the Subcommittee, thanks for
    the opportunity to testify here today.
        So first, noncompete agreements are ubiquitous. Most
    studies find that, roughly, one in five workers are subject to
    a noncompete, and without a ban, that share would almost surely
    keep rising.
        To understand the effect of noncompetes on workers, it's
    useful to remember that, essentially, the only source of
    leverage that an individual non-unionized worker has with
    respect to their employer is their ability to quit and take a
    job somewhere else. That is the thing that means their employer
    has to provide them a job that is competitive enough in terms
    of compensation and opportunities that they're not incentivized
    to leave and take another job or start their own business.
        But noncompetes cutoff that source of worker leverage at
    the knees. When workers do not have the freedom to take another
    job, their employers simply do not have to pay them as well or
    provide them as good a job. And an extensive body of research
    bears that out, showing that noncompetes significantly reduce
    wages.
        OK. Some claim that, though noncompetes reduce wages,
    they're still necessary because, they say, they boost
    innovation by incentivizing firms to invest in developing
    important advances. However, the evidence consistently finds
    that the net effects of noncompetes on innovation go in the
    opposite direction, and here's why: by preventing workers from
    leaving their employers to create new business, noncompetes
    reduce business formation, reducing dynamism in the economy.
    And by keeping workers locked in jobs, noncompetes reduce
    productivity growth. The economy runs the strongest when
    workers are in the jobs that are the best match for their
    skills and interests. Noncompetes keep workers from being able
    to go to firms that yield the most productive matches.
        The declines from noncompetes in business formation and
    job-to-job mobility cause an overall decline in innovation. So
    for example, studies consistently find that noncompetes lead to
    significant decline in the rate of patenting, including in the
    rate of breakthrough inventions.
        OK. Further, banning noncompetes will likely reduce
    inflation. Noncompetes increase concentration in markets for
    goods and services by preventing workers from leaving their
    employers to create a new business or to join other firms that
    would intensify competition. And all of that increases prices.
        So for example, research shows that noncompetes
    significantly increase the cost of physician services. Banning
    noncompetes is estimated to reduce health care costs by at
    least $74 billion over the next 10 years.
        It is also worth noting that employers do not actually need
    noncompetes to protect trade secrets. Intellectual property law
    provides businesses with significant legal protections for
    trade secrets and employers are also able to use tailored
    nondisclosure and nonsolicitation agreements. Provisions like
    those that directly address what employers may and may not do
    with company secrets allow businesses to protect trade secrets
    without being such a blunt instrument that they harm
    competition by taking away workers' freedom to take another job
    at another firm or start another business if they leave their
    firm.
        OK. Some have claimed that the FTC does not have the
    authority to ban noncompetes, but the FTC Act clearly states
    that unfair methods of competition are illegal and it
    authorizes the FTC to issue rules and regulations that prevent
    their use.
        And I think it's worth stepping back and just noticing
    noncompetes are not trying to hide that they are contrary to
    open and fair competition. It is in their name. With the
    noncompete rule, the FTC is doing exactly what it was empowered
    and directed to do by the FTC Act--take action to protect fair
    competition.
        Finally, I'll say it's worth considering who benefits from
    noncompetes. Noncompetes benefit the owners of existing
    businesses who want to protect their advantage by stopping new
    businesses from forming and competing with them. They also
    benefit existing businesses who want to pay their workers less
    and prevent other firms from being able to hire them away by
    offering them better jobs with better wages.
        So it is not actually surprising that groups representing
    incumbent business owners are fighting tooth and nail to keep
    their noncompetes, but that does not mean noncompetes are good
    for the country. They aren't. They are bad for the vast
    majority. They are bad for economic dynamism and innovation.
    They depress business formation and labor mobility. They hurt
    productivity and growth. They raise wages; they shrink--they
    raise prices; they shrink workers' wages. They restrict
    workers' freedom.
        Banning these coercive and unfair agreements is fundamental
    to the FTC's mandate, and the workforce, consumers, and the
    broader economy will be better off for it.
        Chair Warren. Thank you very much, Dr. Shierholz. We
    appreciate your testimony.
        Dr. Toussaint.

             STATEMENT OF R. JAMES TOUSSAINT, MD FAAOS,
                       ORTHOPEDIC SURGEON

        Mr. Toussaint. Good afternoon, Chair Warren, Ranking Member
    Kennedy, and Members of the Committee. It's an honor to be
    here, and I thank you for inviting me to discuss my experience
    with noncompete agreements from a doctor's perspective.
        My name is Rull James Toussaint. I'm an orthopedic surgeon
    at the University of Florida as of 2022. And I'd like to state
    for the record that the opinions expressed herein are my own
    and do not reflect the positions of UF or UF Health.
        I was born in Haiti and emigrated to Florida, where I
    achieved the American dream. I was the first in my family to be
    accepted to college. I worked on Wall Street after college to
    pay off my student loans.
        I was then accepted to medical school, where I graduated
    among the top of my class. And as a result, I mastered Harvard
    University's orthopedic surgery residency program and then
    completed an orthopedic foot and ankle fellowship.
        In 2014, I joined a private practice group in north central
    Florida as their only foot-and-ankle-trained orthopedic
    surgeon. I was one of only two surgeons with this expertise
    across a dozen mostly rural counties serving over 850,000
    people.
        Over the next few years, my partners and I felt the
    pressures of decreasing reimbursement, coupled with the burdens
    of preapproval requirements from insurers and competition from
    other practices. We felt that an infusion of capital was
    necessary to remain sustainable.
        As a result, we entered into a purchase agreement with a
    private equity company headquartered in California. The deal
    closed in 2017.
        Although I cannot disclose the transactions details, there
    was, indeed, a noncompete clause. Per the noncompete clause, I
    would be restricted from practicing orthopedic surgery within
    25 miles of any facility in which the group was currently
    providing medical services; any facility in which the group had
    previously provided medical services; any facility in which the
    group was targeted for expansion within the entire State of
    Florida, and any facility the group was in discussions with
    related to a potential acquisition. This noncompete was valid
    for 2 years, and, of course, the group was located in multiple
    States.
        One might wonder why we would sign such a deal. The reality
    is that the nuances of the noncompete were not known until we,
    the doctors, spent hundreds of thousands of dollars in
    transaction expenses related to the acquisition. We felt backed
    into a corner and believed that our only choice was to proceed
    with the transaction in good faith.
        Unfortunately, within months after closing the deal, the
    morale of the physicians and the staff declined. Instead of
    cost savings, the practice's overhead expenses increased
    significantly due to more layers of administrators, excessive
    management fees, and millions of dollars of debt expenses.
        The overhead increased so substantially that some
    physicians not only did not receive a paycheck, but actually
    paid to work, despite the physicians taking on all the risks of
    patient care. All the while, the cost to the patients started
    to rise and they complained that their quality of care
    decreased.
        Personally, I became disillusioned by management focused on
    dollars instead of the quality of care. I eventually put in my
    resignation stating my intent to leave for academic practice at
    the nearby nonprofit public institution.
        This decision made sense, given that the only other
    orthopedic foot and ankle surgeon in the entire region was
    retiring and I would be able to help educate the next
    generation of doctors. Despite this, the private equity group
    filed suit against me.
        It did not matter to the group, to the private equity
    group, that a community of over 850,000 people would not have a
    specialist surgeon to care for them. It also didn't matter to
    the private equity group that the university was the only
    contracted provider of orthopedic care for Medicaid patients in
    the community, and without me, they would have to travel hours
    away for care.
        And finally, it did not matter to the PE group that the
    State of Florida had already enacted a special statute, Chapter
    542, Section 336, stating that, if one entity employs all the
    doctors within a specialty in the county, that the noncompete
    is already void. It didn't matter to them.
        Despite all of this, within days of my leaving the
    practice, the private equity group threatened legal action to
    prevent me from entering academic practice. Despite the
    aforementioned Florida statute negating the noncompete, the
    private equity goals were clear--to wage a prolonged legal
    battle in the hopes that I would give up and leave my community
    before a final judgment was made.
        After an expensive 4-month dispute, a legal settlement was
    finally achieved and I was able to join the university. Not
    surprisingly, many patients from my previous practice told me
    that they were very frustrated when they called the group
    asking for me. They said that the private equity group lied to
    them and stated that I had retired from medicine, which is
    clearly untrue.
        Because of my concerns with private equity in health care,
    including their use of noncompete agreements, I joined the
    Coalition for Patient-Centered Care, a group of health care
    stakeholders who oppose private equity's influence over
    independent physicians.
        I have experienced the negative consequences that
    noncompete agreements have on patients, the physicians, and
    their communities. And I conclude that these restrictive
    covenants negatively impact patient access to physicians, limit
    the quality of care, and increase costs to all parties.
        Thank you.
        Chair Warren. Thank you, Dr. Toussaint, and I very much
    appreciate your coming here to share your story.
        Ms. Hayley Paige, you're up next.

          STATEMENT OF HAYLEY PAIGE, SMALL BUSINESS FOUNDER
                     AND WEDDING DRESS DESIGNER

        Ms. Paige. Good afternoon, everyone. This is such an honor.
    Thank you so much for having me. I love my country.
        I am somebody that knew what I wanted to do at a very young
    age in life and I dedicated my childhood education and industry
    experience to bringing women joy through wedding dress design.
    And, boy, did I love it.
        My dresses were in over 300 stores. I was on a show called
    ``Say Yes to the Dress'', and at one point, Vogue actually
    named me one of the top 10 wedding dress designers in the
    world. So this was my dazzling American dream.
        However, my journey took a harrowing turn when I faced the
    restrictions of a noncompete clause. This stifled my ability to
    work; took away what I loved doing most. It left me financially
    devastated and it shook my faith in the justice system.
        Let me take you back to how it started. In 2011, at 25
    years old, I signed an employment agreement that included a
    noncompete clause, as well as an intellectual property
    provision. I believed that this noncompete was reasonably
    restricted within the duration or term of my employment. It
    would be perfectly reasonable to not compete with the very
    company that I was trying to add value to.
        But there was also a disproportionate negotiation power
    that many young employees and young creators are subjected to.
    I felt compelled to sign that contract or I would lose my big
    opportunity.
        Nine years later, thousands of dresses, I attempted to
    renegotiate that contract, as I felt I had outperformed. My
    contract was due for a good upgrade.
        My former employer sued me in Federal court, and it was
    only then that I realized exactly how that contract was going
    to be interpreted. Under a subsequent injunction, I was
    forbidden from using my own birth name. I was also not allowed
    to practice my chosen trade for a 7-year period unpaid--no
    commission, no royalties. I also had to hand over my heavily
    followed and personal social media accounts.
        It dawned on me that securing my dream job at 25 years old
    actually required me to forfeit that dream once that job was
    over. Now, I refused to succumb to victimhood entirely. I chose
    a creative pivot. I changed my name publicly to Cheval and I
    started a new Instagram.
        But the idea of having to change my trade after I had
    dedicated my life to a very specific skill set, where, all of a
    sudden, it felt like my livelihood became a threat to others,
    was the hardest thing of everything that happened to me. Even
    not being able to use my birth name, it was still worse to not
    be able to practice my trade.
        So I think you can imagine what happened next. I fought.
    Three-and-a-half years of litigation, millions of dollars that
    I didn't even have, I am now in debt. I spent every dollar I
    ever made designing wedding dresses to fight for my right to
    once again design wedding dresses.
        I was privileged to have a devoted and incredible legal
    team that went to bat for me when my financial situation ran
    out. Most people do not have this privilege.
        It took us two trips to the appellate court just to get my
    Instagram back and prove that it was mine.
        Now, the residual stress on brides was devastating for me.
    I'm very close with many of my brides and they dreamed of this
    moment for years--to pick the dress of their dreams from their
    favorite designer, and they no longer could.
        I also experienced residual stress from my store base who
    invested in a designer brand from a very specific designer.
        In my mind, my contract did not benefit me, my brides, or
    my industry. It also didn't seem to impact positively my former
    employer, who filed for bankruptcy during the litigation.
        The American dream is built on the premise of what you can
    do for your country. What is your contribution? And if we want
    to continue to inspire innovation, tax people the way that we
    do, and assure that opportunities remain accessible, we cannot
    restrict people from working.
        If corporations are not limited in hiring and profiting,
    why are employees limited or restricted on working and earning?
    In my situation, I was replaced by another designer in a matter
    of months. Yet, I couldn't make a living for years.
        Now, I know this testimony is from the perspective of an
    employee, but I am now also a small business owner. And what
    I've learned is that there are very effective legal precautions
    you can take to protect your intellectual property. I now
    officially own my own and I know why it is so important. There
    are privacy policies, fiduciary duties. There are also ways to
    impose nondisclosure agreements to effectively safeguard trade
    secrets.
        Imagine a world where the next great innovation is
    unrealized; where the brightest minds are not in laboratories
    or hospitals or sitting here in this courtroom. Just imagine
    what we could be missing out on.
        The irony is that this hearing is taking place in one of
    the best days of competition in the world--the women's
    gymnastics team finals in the Olympics. I was a competitive
    gymnast for 16 years. So you can only imagine the poetry that I
    am experiencing right now in this very moment.
        But I can tell you first-hand that the pride and the
    patriotism that you can feel when you have no cap on what
    you're capable of doing, that is where the magic is. And that
    is where I believe our country goes.
        So to that, long live fair competition, and let the girl
    design the dress.
        [Laughter.]
        Chair Warren. Thank you very much, Ms. Paige. That was very
    powerful.
        I recognize Senator Smith from Minnesota to start our
    questions.
        Senator Smith. Thank you very much, Chair Warren and
    Ranking Member Kennedy.
        And thank you so much to our testifiers here today. I am
    really grateful for your testimony.
        So I am very glad to see the FTC rule on noncompetes, and I
    think the stories that you told, Dr. Toussaint and Ms. Hayley
    Paige, really demonstrate it. To think that, with these
    noncompetes, you would lose not only your livelihood, but even
    your identity, because you're sort of trapped in this agreement
    that in many cases, I hear over and over again, people don't
    even really understand what it is that they're signing and what
    long-term implications it has.
        I want to just turn, first, to Dr. Shierholz. You know, as
    I understand it, you testified one in five workers in this
    country have been covered by noncompetes. Why is it important
    that the FTC rule cover such a very broad range of workers?
    Because I think maybe most Americans can sort of understand
    that, if you are like a top-notch scientist working for a big
    company, that you shouldn't be able to take, you know, those
    trade secrets and go to another company. But that's not what
    we're talking about here, is it?
        Ms. Shierholz. So is this on? This is on.
        Senator Smith. Yes.
        Ms. Shierholz. So, noncompetes, the evidence shows that
    they are not just applying to people that are high--who make
    high wages, who may be the ones that are most likely to have
    access to trade secrets; that they really are even prevalent
    among very low-wage workers. Like there's one study that shows
    that the median person who is affected by a noncompete is an
    hourly worker who makes $14 an hour. So they really do run the
    gamut.
        And then the other thing is it's really important to ban
    noncompetes, though, across the board, not just for low-wage
    workers, but across the board. And one of the reasons is,
    higher-wage workers, they're the ones who are actually in the
    position to be the most likely to actually be able to
    negotiate. They're not the 25-year-old, right?
        Senator Smith. Exactly.
        Ms. Shierholz. They can potentially negotiate over their
    full employment package, including restrictive covenants, like
    noncompetes. So I'm less worried about the wage-suppressing
    effects from noncompetes among high-wage workers, but I'm
    deeply worried about the other economic harms from noncompetes
    amongst high-wage workers--reducing business formation; the
    declines in productivity; declines in innovation; increases in
    prices.
        Senator Smith. Right.
        Ms. Shierholz. So it is incredibly important, when we think
    about the broader economic impact, that we have this very broad
    band of noncompete.
        Senator Smith. So I want to get to sort of follow up on
    that. Because I think we could hear from Dr. Toussaint and Ms.
    Hayley Paige about kind of the impact that this had on them.
        And I am thinking about my home State of Minnesota. In
    2023, the State passed legislation to ban new noncompete
    clauses in employment agreements. And with that action, it
    became the fourth State to prohibit these clauses--a very
    important step forward.
        Interestingly, the Minneapolis Fed says, as you were
    testifying, they expect that this change will support worker
    mobility and also yield other economic benefits, as we've been
    talking about.
        But what was really interesting is, as they talked with
    lower- and middle-wage workers--so maybe people just getting
    started out; people who were not at the senior executive level
    who had worked under noncompetes--here's what they found: that
    the stress and anxiety were common experiences for workers, as
    they struggled to kind of figure out, come to terms with what
    they had agreed to.
        There's a really interesting example of that with a
    cosmetologist. A cosmetologist leaves her employer. She was
    very careful not to tell her old clients that she was leaving
    and not--know where she was going to work next. She was told,
    like, you can't even accept those clients again, unless you're
    providing a different service. Like you're doing their hair
    instead of doing their makeup.
        And so some of those clients came to her, and then her
    previous employer reaches out to her and says, ``Hey, stop it.
    You can't do any work for any of those people at all going
    forward.'' And, of course, this creates huge worry and anxiety
    for her.
        I mean, how common do you see--and this is maybe for any of
    you--how common do you think it is, this sort of level of
    intense worry and anxiety that this cosmetologist experienced,
    according to the Minneapolis Fed?
        Ms. Shierholz. I'm happy to go first. I will----
        So it's very, very common. And one of the things that sort
    of underscores this is that noncompetes actually have a
    chilling effect on worker mobility, on business formation, even
    in States where they are not enforceable. The very existence of
    a noncompete actually deters workers from leaving a job, from
    forming a new business.
        Senator Smith. You just don't feel like you have as much
    mobility.
        Ms. Shierholz. For the reason that you said, rightly, the
    threat. Litigation is incredibly expensive, both financially
    and otherwise, and it has--just the threat of that is actually
    what businesses use to enforce their noncompetes----
        Senator Smith. Right.
        Ms. Shierholz. ----rather than, oftentimes, rather than
    lawsuits themselves.
        Senator Smith. Thank you.
        I know I'm out of time, Madam Chair.
        Senator Kennedy. Thanks, Tina. Thanks, Tina.
        Dr. Toussaint, you're an orthopedic surgeon, is that right?
        Mr. Toussaint. That is correct.
        Senator Kennedy. OK. Where did you go to med school?
        Mr. Toussaint. I went to medical school at NYU, sir.
        Senator Kennedy. OK. And you were, I think you said you
    were at the top of your class?
        Mr. Toussaint. Yes, sir.
        Senator Kennedy. And then you trained at Harvard?
        Mr. Toussaint. That is correct.
        Senator Kennedy. And then you joined other orthopods in a
    practice, right?
        Mr. Toussaint. That is correct.
        Senator Kennedy. How many orthopedic surgeons were in your
    class--were in your practice rather?
        Mr. Toussaint. I don't recall the number of orthopedic
    surgeons specifically, but there were approximately 25 partners
    within the group.
        Senator Kennedy. OK. And you were a partner?
        Mr. Toussaint. Yes, sir.
        Senator Kennedy. OK. And a private equity company came in
    and said they wanted to buy you, is that right?
        Mr. Toussaint. That is correct.
        Senator Kennedy. And you and partners sold, right?
        Mr. Toussaint. That is correct.
        Senator Kennedy. And they paid you a bunch of money, right?
        Mr. Toussaint. They paid me some money, sir, that is
    correct.
        Senator Kennedy. Yes. How much did you walk away with?
        Mr. Toussaint. I walked away with nothing.
        Senator Kennedy. No, when you--when they bought your
    practice, you were a partner; you were paid, right?
        Mr. Toussaint. Right. At that point, sir, I did not walk
    away, but I was----
        Senator Kennedy. Well, I didn't--strike the ``walk away.''
    How much----
        Mr. Toussaint. OK.
        Senator Kennedy. How much did you personally gain from the
    sale to the private equity group?
        Mr. Toussaint. I'm not allowed to disclose the details of
    the transaction, sir.
        Senator Kennedy. Was it over--why not?
        Mr. Toussaint. Because that is part of the transactions
    restrictive agreement, sir.
        Senator Kennedy. Was it over a million dollars?
        Mr. Toussaint. I'm not allowed to say, sir.
        Senator Kennedy. Was it over $2 million?
        Mr. Toussaint. I'm not allowed to say the amount.
        Senator Kennedy. It was a lot of money, though, wasn't it?
        Mr. Toussaint. I do not believe it was worth my freedom,
    sir.
        Senator Kennedy. But you did at the time?
        Mr. Toussaint. I did not, sir.
        Senator Kennedy. OK. Why did you sign the agreement?
        Mr. Toussaint. Because it was, for the lack of a better
    term, I was compelled to sign the agreement in order to fall in
    line with the group, sir.
        Senator Kennedy. Here's why I think you signed the
    agreement--and I don't mean to offend you.
        Mr. Toussaint. It's OK.
        Senator Kennedy. I've seen these kind of transactions
    before. This has gone on all over the country.
        Mr. Toussaint. That is correct.
        Senator Kennedy. I think the private equity group came in
    and offered you and your partners a huge sum of money--in the
    millions. And I think you took it. And I think, later, you
    regretted it and you wanted out of the deal. And I think that
    violates the freedom of contract. And I will bet--no offense,
    Doctor--but I will bet that you wouldn't be willing to give
    back the millions of dollars that you took away from the sale
    in order to get back your freedom to practice.
        Mr. Toussaint. Can I respond?
        Senator Kennedy. Sure.
        Mr. Toussaint. If I may respond, thank you for the
    opportunity to respond to your question, sir.
        I have to say that, number one, I was not in favor of the
    sale. That's number one.
        Senator Kennedy. Mm-hmm.
        Mr. Toussaint. And then number two, I have to disagree with
    your final statement--without giving away any details. But I
    can say, in my personal experience, that is false, sir.
        Senator Kennedy. OK. You took the money, though, didn't
    you?
        Mr. Toussaint. The thing that I disagree with, sir, is
    whether or not I gave it back.
        Senator Kennedy. Yes, but did you take the money?
        Mr. Toussaint. I gave it back, sir.
        Senator Kennedy. You gave back all the money that the
    private equity group paid you?
        Mr. Toussaint. As part of the----
        Senator Kennedy. Is that your testimony?
        Mr. Toussaint. As part of the settlement, I have to say
    that I had to buy out of the noncompete.
        Senator Kennedy. Yes. I don't want to play games, Doc,
    but----
        Mr. Toussaint. Yes, sir.
        Senator Kennedy. ----when the private equity guys came in
    and said, ``We want to buy you out,'' you might have disagreed
    with your partners, but it sounds like they outvoted you.
        Mr. Toussaint. That's correct.
        Senator Kennedy. You could have left the practice then. You
    chose not to. You chose to take the money, did you not?
        Mr. Toussaint. If I chose to lose--to leave the practice,
    sir, I would have had to leave----
        Senator Kennedy. I understand.
        Mr. Toussaint. ----the State.
        Senator Kennedy. I get that. But you took the money, did
    you not?
        Mr. Toussaint. Yes.
        Senator Kennedy. OK. Thank you.
        Doctor, let's suppose that Elon Musk decided to leave
    Tesla; General Motors hired him away; said, ``We'll pay you $50
    billion a year because we, General Motors, are sucking wind,''
    and they are. ``But if we sign you up, we want an employment
    contract and we're going to show you all our intellectual
    property. And we're going to insist that you sign a noncompete
    agreement.''
        Now, you've got General Motors. You've got Elon Musk, one
    of the wealthiest, if not the wealthiest, people in the world.
    Why should those two not be allowed to negotiate an employment
    contract, including the noncompete agreement?
        Ms. Shierholz. As I explained to Ms. Smith, I am less
    worried about wage-suppressing effects of noncompetes on very
    high-wage workers. Obviously, Elon Musk would be able to
    negotiate a noncompete with a new employer. He has an
    incredible----
        Senator Kennedy. Would you have any problem saying that's
    OK?
        Ms. Shierholz. There are other options for key-end----
        Senator Kennedy. Yes, but would you have a problem----
        Ms. Shierholz. I would have a deep problem with saying
    that's OK. Because what we're talking----
        Senator Kennedy. Mm-hmm. You're just against all the
    noncompetes?
        Ms. Shierholz. Because of their effects on the economy;
    their effects on, negative effects on workers; negative effects
    on consumers, and negative effects on the economy more broadly.
        Senator Kennedy. Well, I just don't think you're very
    objective. I don't think you're a very objective witness.
        It's been my experience that most of these issues, there
    are always two sides. And no offense, you're entitled to your
    opinion. I enjoyed listening to you, but I can tell from your
    breathless presentation that you just speak passionately about
    this, and I respect that. But I think you're kind of blinded by
    your ideology. That's just my point of view. But I thank you
    for being here.
        And I went over. Give Tina more time.
        [Laughter.]
        Senator Kennedy. Because she stayed within her limits and I
    went way over. And I've got to go vote.
        Chair Warren. All right. Thank you.
        So nearly 30 million people, as you talked about, Dr.
    Shierholz--since I tend to think you are driven by data, and
    that's what's important here--are trapped in noncompete
    agreements. Corporations use noncompete agreements to hold
    workers hostage. It prevents them from either starting a
    competing business or going to work for another employer.
        So a worker who has a noncompete faces two bad options:
    stay stuck in a job that you really want to leave or upend your
    life to break free from the noncompete by moving away from your
    current job, changing your career, leaving the workforce, or
    risking an expensive years-long battle in court.
        I believe that workers should have the freedom to switch
    jobs. They should be able to seek higher wages, better working
    conditions, and if they so choose, to start their own
    businesses. But big businesses want to control workers and
    stifle competition, even if it hurts our economy as a whole.
        Dr. Toussaint, you had to sign a noncompete agreement when
    your medical practice was bought by a private equity company.
    And can you just say a little more--you talked about this a bit
    in your opening statement--about how broad this was? This was
    not a noncompete that said, ``You can't go right next door and
    open the same practice under almost the same name.'' How broad
    was your noncompete? What all did it cover?
        Mr. Toussaint. Thank you for the question.
        It's important to note that the private equity group at the
    time was located in three States: Colorado, Arizona, and
    Florida. My noncompete specifically said that I would be
    restricted from practicing orthopedic surgery within 25 miles
    of any facility in which they are doing business; any facility
    that they had previously done any business; any facility that
    they are currently targeting for expansion within the entire
    State that I am currently living in, which is Florida, and then
    any facility that they have had discussions with and thinking
    of acquiring in the future. And this would be valid for over
    I'm sorry--approximately 2 years. So we're talking three
    States.
        And in my specific location, at the time I was one of two
    surgeons covering treatment, specialized treatment, for over
    850,000 people, most of which are within rural counties.
        Chair Warren. OK.
        Mr. Toussaint. I thought that was insane.
        Chair Warren. All right. So they have barred you,
    basically, from practicing medicine in any of these three
    States. And I detect from the way they wrote it, in case they
    were thinking about any other States, you would also be covered
    in those.
        But I take it, it was more than just a prohibition on going
    into private practice. When you were offered a job at a
    publicly funded academic hospital, what happened? Can you say
    again about what happened when you tried to accept that job?
        Mr. Toussaint. Right. Unfortunately, as part of their
    agreement, they wanted me to give a copy of the employment
    agreement and noncompete clause to every employer that I was
    having a discussion with.
        Chair Warren. Right.
        Mr. Toussaint. So that's essentially like a scarlet letter
    or, like, basically a mark against me to say that, ``If you
    want to hire this doctor, despite his specialized training,
    you're going to have to go through us. And we are in multiple
    areas across the United States.''
        Chair Warren. Right. And so now, let's talk about what ``go
    through us'' turned out to mean. In fact, you were able to go
    become a teacher of other doctors, which is, obviously, not a
    direct competition originally. So calling this a noncompete, it
    shows how much it is stretched out in terms of how much it
    restricts you from doing.
        But what was the consequence of the ``you have to go
    through us'' part of this contract? How did you, ultimately,
    end up going to work for the university?
        Mr. Toussaint. Thankfully, the university and the community
    needed me more than they wanted me out of town. I,
    unfortunately, had to engage a number of community leaders,
    including the NAACP, and a lot of my patients, to go and
    support me in this effort to be able to work. If I didn't do
    that, I would have to relocate out of the State, and I would
    have missed out on a number of collaborations within the
    university.
        Chair Warren. You know, I just want to say, we talk about
    what happens to an employee who is stuck in one of these
    noncompetes, but you have given us a perfect example of how
    those noncompetes end up hurting communities; in your case, end
    up hurting patients, others that you serve.
        And in this case, I just want to underscore communities are
    served now by the more than 37 percent of physicians across
    this country who are currently bound by noncompetes. So unless
    you go through the person who owns that contract, these are
    whole communities that could lose access to the physicians that
    have served them so well.
        So you had folks on your side who were able to weigh-in, so
    that you, ultimately, were able to go to the university.
        Ms. Paige, let me turn to you. Your former employer used a
    noncompete to keep you from designing wedding dresses, whether
    it was under your name or some other name. Can you just say
    something about what that meant, both for you and for your
    brides?
        Ms. Paige. Thank you for your question, Senator Warren.
        It was devastating and disheartening. I am in an industry
    that relies on an emotional purchase and there is an authentic
    connection made when saying yes to the dress. And to have that
    tarnished or severed is almost as if we're putting a veil over
    what's really happening.
        And in my experience, it was truly difficult to imagine how
    you could communicate and make that connection to a bride. Not
    only I couldn't express myself creatively in the way that I
    thought I could, but I couldn't even use my name or practice
    the trade.
        It was interesting, I think, too, from the business
    perspective. Because we are a wholesale business and all of
    these stores had invested specifically in a designer
    collection. And so when the designer was no longer behind the
    dresses, they were affected. They felt the residual stress of,
    how do I explain to the consumer and the brides coming in the
    doors that this dress no longer has the Hayley Paige behind it?
        And obviously, when you invest that kind of money in your
    business, and you're unable to sell the merchandise or feel
    ethically icky in doing so, it creates a really big void in the
    marketplace.
        Chair Warren. Right. So hard on patients; hard on brides.
    Hard on the other small businesses that have built up around
    you and your brand, wanting to sell those Hayley Paige gowns.
        Can you just say one more word about that? I thought about,
    when I first heard about your story, what it must feel like if
    you're a pianist and you're not allowed to play the piano; if
    you're a painter and you're not allowed to paint; if you're a
    wedding gown designer and you have been told you cannot make
    wedding gowns. There are other things you can do in life, but
    that has been crossed off your list for years. Can you just say
    a little bit about how that feels?
        Ms. Paige. Yes. Thank you for your question, Senator
    Warren.
        It was soul-crushing. But what's interesting about my case
    is that it was challenging my identity from three different
    factors. I was unable to use my birth name; I was severed
    connection to my social media community, and I was withheld
    from my trade. Of all three of those things that are extremely
    hard to wrestle with and digest, not being able to practice my
    trade was the most emotional and hard to overcome. And in that
    moment, I had realized how much of my identity came from my
    craft. And I think when you devote, you devote yourself to a
    craft, part of you becomes that craft. And it really did feel
    like a severing of who I was.
        And I'm so grateful, of course, for the support I received,
    but it was also particularly devastating to feel the confidence
    and the height I was at in my career--not very many people can
    perform at that level. And that is something that should be
    celebrated.
        And as a woman who struggles with insecurity, to feel like
    you're really good at something, but you're not allowed to do
    it, and then you have these amazing women that want to see you
    do it, but then you can't deliver, it's emotional and
    devastating.
        Chair Warren. So, Dr. Shierholz, you've just heard from two
    people who have lived through experiences with noncompetes.
    Each of them has fought back and they have mustered communities
    around them and been able to hit back. But talk just a little
    bit about the effect of these noncompetes across our economy.
        Ms. Shierholz. Yes. Yes, the things that Ms. Paige and Dr.
    Toussaint experienced, they're just all too common. Noncompetes
    restrict workers' ability for starting a business; for
    practicing their craft in their community; for taking another
    job in their community. And economywide, when you put the data
    to it, what you find is that reduces business formation; it
    reduces worker mobility, and then those things reduce
    productivity. They reduce innovation. They increase prices, and
    they reduce workers' wages.
        So we can see how this played out in these folks' lives,
    and then when you look more broadly at the economy, it's just
    incredibly harmful on all measures.
        Chair Warren. Well, I'm very grateful to you two for
    telling your stories, and very grateful to you, Dr. Shierholz,
    for just describing or putting the context all across our
    economy.
        The Biden-Harris administration has taken historic action
    to ban noncompete agreements, and right now, it is fighting
    back against the Chamber of Commerce and these giant
    corporations that continue every day to profit off noncompete
    agreements.
        Now, one of the things I want us to turn to now--I'm just
    going to give myself a second round of questions here, since I
    don't have anyone competing with me for this time.
        [Laughter.]
        Chair Warren. I want to talk about what the Biden-Harris
    administration is doing here and how it is a game changer to
    ban noncompetes. By giving workers the freedom to move jobs and
    to start new businesses, employers are going to have to change
    what they do. They're going to actually have to compete for
    workers.
        Workers' earnings we believe will increase collectively by
    about $400 billion over the next decade, according to the FTC.
    A typical worker, it would be about $500 more that that worker
    could take home. And the American economy will be more dynamic
    and innovative with about 8,500 more new businesses and tens of
    thousands more new patents, if people can get out of these
    noncompetes and go out and either start their own businesses or
    go into business with someone else, or work for someone else.
        We've get this massive economic boom because the FTC has
    designed the ban to be extremely simple. It says no new
    noncompetes at all. It's not fuzzy; it's not fancy. None.
    Existing noncompetes can be enforced only for the most senior
    executives. So good for workers; good for the economy, but big
    corporations are unhappy about this rule.
        So what they say is they can do a rule, but they want a
    rule that is narrower and more complex--more like Senator
    Kennedy was talking about on, well, maybe a case here; maybe a
    case there, but a lot of very complex rules about how to make
    that work.
        Dr. Toussaint, you struggled with a noncompete agreement in
    Florida, where you live, but Florida already has a law that
    says a doctor cannot be bound by a noncompete if in their
    county all the doctors in their specialty work for the same
    employer. So I can't think of a law more specifically designed
    to address your specific issue. Why didn't that law just permit
    you to get out of your noncompete without any further question?
        Mr. Toussaint. Right. Thank you for the question.
        Number one, it's important to realize that this private
    equity company was not based in Florida. And their tactic is to
    file suit outside of their jurisdiction and outside of my own
    jurisdiction. So the plan is to wage a suit away from where we
    both live and make it as long and as expensive as possible to
    the extent that I would give up and I would walk away before a
    judgment is even rendered.
        And so a scenario like that, you can imagine that the
    doctor's resources would not be as sufficient as the private
    equity firm's resources, and they could run it dry. Even
    though, eventually, I might win, it's unclear if I would even
    last that long.
        Chair Warren. So part of the problem we've got here, then,
    is the litigation itself is expensive and they have found ways
    to make it even more expensive.
        I take it, Ms. Paige, that that was what you ran into?
        Ms. Paige. Precisely.
        Chair Warren. Yes, just drive up the costs and grind you
    down into the dirt.
        So the threat of the noncompete is big and important. It's
    also a question of who's going to be on your side to fight
    this. Who had to pay your legal bills, Ms. Paige? Who was
    there?
        Ms. Paige. Unfortunately, I tapped out.
        Chair Warren. That was you, right?
        Ms. Paige. Yes.
        Chair Warren. And Dr. Toussaint?
        Mr. Toussaint. The same here.
        Chair Warren. You had to bear your own legal bills.
        So what the FTC has said is we're going to have a very
    simple rule. It's going to be a nationwide rule. You don't get
    to go sue in some other State and think you can avoid some
    local rule.
        But it's also the case that the FTC can enforce it as an
    unfair practice, which means, instead of being out there all by
    yourself, you will actually have someone on your side. That's
    the idea behind this.
        Yes, I see you smiling, Dr. Toussaint. That sounds like a
    good thing.
        You know, I want to point out one more thing before we
    leave this. And that is that the FTC's noncompete ban is very
    popular. Polls show that an overwhelming proportion of
    Americans and a majority of small business owners support the
    FTC's rule. In fact, as you know, when the FTC is about to put
    a rule in place, it's still a proposed rule, they invite public
    comment. They got 25,000 comments on the noncompete rule.
        And I just want to say, not everybody sits around in the
    evening and says, ``What can we do tonight? I know, let's go do
    a noncompete rule comment on the FTC website.''
        [Laughter.]
        Chair Warren. Of those 25,000 comments, 24,000 came from
    individuals and businesses who said, ``We want to have
    meaningful noncompete clauses. This is valuable to us.'' And
    many, many people went on the FTC website to tell their own
    stories--very much like yours, Ms. Paige; very much like yours,
    Dr. Toussaint--to talk about just how challenging it was when
    they got hit with a noncompete.
        And how many people just gave up? They did not have the
    money for lawyers. They simply could not go forward. So they
    stayed in really horrible jobs.
        At this point, I'm going to pause and see if Senator Van
    Hollen would like to ask some questions.
        Would you like to do that?
        Senator Van Hollen. Yes, thank you, ma'am.
        Chair Warren. Good. Senator Van Hollen.
        Senator Van Hollen. Thank you, Madam Chair, and thank you
    for holding this hearing.
        I thank all of you for your testimony. As you know, we're
    bouncing back and forth between hearings, but I am really
    grateful for all of you being here to tell your stories.
        And I do want to recognize the good work of FTC Chair Lina
    Khan and her leadership in advancing the rules to address the
    issue of these noncompete agreements. Because I think all of us
    recognize that the original idea behind, you know, noncompete
    agreements was people have really the crown jewels, the
    secrets, right, of a particular company and you signed an
    agreement to make sure that you can't use that intellectual
    property, so to speak, in another job.
        But now, we find out that 30 percent of noncompete
    agreements affect workers earning less than $13 an hour and go
    way beyond what was ever intended for noncompete agreements.
        So, Dr. Shierholz, I would like, if you could, to talk a
    little bit about how noncompete agreements affect workers who
    are just starting out in their careers. Right? This is
    impacting individuals at young ages and inhibiting their
    ability in many ways to go up the career ladder and find new
    opportunities. Could you just talk broadly about that?
        Ms. Shierholz. I can. Hayley's example is the perfect
    example of how these can just lock in young people.
        But what we do know is that banning noncompetes will raise
    the lifetime earnings of young workers by raising their wages
    and by reducing prices. And I do want to just say that some
    people will claim that, without noncompetes, businesses won't
    do training, and then that will reduce the long--you know, that
    will have negative long-term wage effects.
        So the evidence shows that that is not true. There's good
    studies showing that, like, people who start a job in a State
    that strongly enforces noncompetes have reduced earnings for
    more than 8 years compared to other workers. So there's
    offsetting factors, but, on net, workers--and that goes for
    young workers as well--are made worse off by noncompete
    agreements.
        Senator Van Hollen. Well, thank you. Thank you for that.
        And, Dr. Toussaint, again, I apologize if this has already
    been covered. I was reading about your story and your personal
    experience as a physician subject to a noncompete agreement.
    Obviously, that has a harmful impact on physicians, but it
    also, of course, has a harmful impact on all the patients who
    don't have access to the services of physicians like you.
        So could you just talk a little bit about how these
    noncompete agreements interfere with a patient's ability to get
    care and the continuum of care that they need?
        Mr. Toussaint. Thank you for the question, Mr. Van Hollen.
        It's fair to say that patients follow their physicians.
    They don't follow the company name or the clinic's brand. They
    follow the doctor.
        I was one of two subspecialist orthopedic surgeons in an
    area of northern Florida where 850,000 needed to be served. If
    I was driven away and the other surgeon was left--and by the
    way, this other surgeon was nearing retirement--we would have
    had 850,000 people without a subspecialist to train them--I'm
    sorry--to treat them. They would have to travel hours away to
    get their care.
        They did not come to see me because I was under the
    umbrella of a private equity company. And, in fact, the private
    equity company was not even in the area. They're not even in
    the State. They were there for me. And so if I would have had
    to leave, these patients would have had no one to care for
    them.
        I look forward to a Federal ban on these noncompetes
    because it does impact the patient's ability to get care. It
    impacts my ability to care for my patients and to live in an
    area that I have grown and loved. And ultimately, it raises the
    cost for everyone. And I think that this needs to be addressed.
        Senator Van Hollen. Thank you. Thank you for addressing
    both the direct access of care to specialists that people need,
    and then obviously the impact on cost.
        Ms. Paige, in our remaining time, I had a little bit of a
    chance to review your case and the lawsuit, and it's really
    outrageous what happened, but also a very good example to bring
    before the Committee.
        And you've probably covered this with respect to your
    specific case, but could you also talk about how the noncompete
    agreements, like the kind that attempted to restrict you, and
    the lawsuit threaten the ability of young entrepreneurs to
    startup new businesses, something that you would think we would
    want to encourage?
        Ms. Paige. Thank you for your question, Senator Van Hollen.
        I believe this strips away the pursuit of entrepreneurship
    because many young employees and young, hungry creatives are
    not in a position to negotiate for themselves, and they may
    agree to something at the time that sounds quite exciting and
    like the opportunity of a lifetime. But as sweat equity is put
    in and circumstances change, it can impact the way the contract
    is read.
        In my case, it was, in my opinion, it was weaponized. And
    one of the reasons I strongly believe they should be banned is
    that, if you do allow some but not others, it still opens the
    gateway for litigation, which can financially ruin any
    individual, but it can also hurt small businesses and
    corporations.
        So I find that the solution to the problem is not through
    restriction or a scarcity mindset. It's through educating on
    other legal resources to protect your business, especially as a
    young entrepreneur looking to protect as you go, but not limit
    yourself.
        Senator Van Hollen. Thank you.
        Really, thank all of three of you for your testimony.
        And, Senator Warren, thank you for pulling together the
    hearing.
        Chair Warren. You bet. Thank you, Senator Van Hollen. We
    appreciate your coming by and asking these questions.
        So I just have one last question I want to take a look at.
    You listen to stories like Dr. Toussaint and Ms. Paige and you
    say it just seems so obvious that we should ban these, and that
    we should not ask people to litigate them, even when they've
    got a rule that looks like it applies to them. Let's just get
    rid of them overall.
        But right now what we've got is a lawsuit ginning in the
    Chamber of Commerce and a handful of giant corporations are
    trying to sue the FTC to prohibit them from going forward with
    this ban.
        So, Dr. Shierholz, we've talked about whether or not
    there's really any legal basis for it. I think that the
    authorizing statute for the FTC makes pretty clear that the FTC
    can do this.
        But the Chamber of Commerce and these big corporations have
    done a little judge shopping and they've gone down to this
    Trump-appointee judge down in Texas and are trying to fight
    this.
        So my question to you is why is the Chamber of Commerce,
    why are these big corporations spending so much money to try to
    block the ban on noncompete clauses?
        Ms. Shierholz. It's because of who they represent. They
    represent business owners, and often very big business owners,
    and those are the ones who actually benefit from noncompetes.
    They benefit because they can protect their position by keeping
    other people from being able to form a business who then
    compete with them.
        They benefit because they can pay their workers less and
    prevent other businesses from being able to hire away their
    workers by offering them better jobs. So they are actually much
    better off with noncompetes.
        And so it's totally reasonable why these business groups
    are fighting tooth and nail to keep their noncompetes, but that
    does not mean that they're good for the economy. It does not
    mean they are good for the country. They are not. They are bad
    for the vast majority.
        Chair Warren. Right. I think your point is a really strong
    point. It's not only that they want to be able to treat their
    workers however they want to treat their workers, and all the
    worker can do is just say, ``OK, I won't work at all.'' That,
    obviously, is not a solution. But that it's also a way for
    these giant businesses to make sure they don't have any
    competition----
        Ms. Shierholz. Yes.
        Chair Warren. ----that the Hayley Paige wedding designs are
    not out there competing with whatever business they want to
    have in the weddings space; that Dr. Toussaint is not working
    with other doctors to provide alternative medical practice and
    an alternative approach to it; that the private equity group
    that set this up wants to continue to reap all the profits of a
    noncompetitive market. And that that's a key part of what's
    going on here.
        I just want to say again how much I appreciate your
    bringing this forward and telling these stories, so that people
    who may not have ever have had a noncompete clause, or worse
    yet, may actually be subject to a noncompete clause, but will
    not discover it until the day comes that they want to go work
    somewhere else, or they want to start their own business, or
    they've got some terrific idea and want to link up with a
    couple of partners and go build something new, and discover
    that they're not able to do that.
        I so appreciate what the FTC and the Biden-Harris
    administration is doing to just level the playing field; to say
    that anyone who goes to work can go to work. We can have all
    the rules we need about not disclosing confidential information
    or taking someone else's intellectual property, but as for your
    own labor and how you want to work, and what you want to do,
    that's open and you can take that labor where you want to go
    and build what you want to build. That is the American way.
        So thank you very much for being here. I'm grateful to you
    for coming to this hearing.
        Questions for the record are due 1 week from today. That's
    Tuesday, August 6th.
        For our witnesses, if there are additional questions, you
    will have 45 days to respond to any of those questions.
        And with that, this hearing is adjourned.
        [Whereupon, at 3:41 p.m., the hearing was adjourned.]
        [Prepared statements and additional material supplied for
    the record follow:]

                     PREPARED STATEMENT OF HEIDI SHIERHOLZ
                      President, Economic Policy Institute

                                 July 30, 2024

        Chair Warren, Ranking Member Kennedy, and Members of the
    Subcommittee, thank you for the opportunity to testify today on the
    benefits to workers, businesses, and the economy of banning noncompete
    agreements.
        My name is Heidi Shierholz, and I am an economist and the president
    of the Economic Policy Institute (EPI) in Washington, DC. EPI is a
    nonprofit, nonpartisan think tank created in 1986 to include the needs
    of low- and middle-wage workers in economic policy discussions. EPI
    conducts research and analysis on the economic status of working
    America, proposes public policies that protect and improve the economic
    conditions of low- and middle-wage workers, and assesses policies with
    respect to how well they further those goals. I previously served as
    Chief Economist at the U.S. Department of Labor during the Obama
    administration.
        Noncompete agreements are clauses in employment contracts that
    prevent workers from going to work for, or starting, a competing
    business within a certain period of time after leaving a job. Under the
    Federal Trade Commission's (FTC's) noncompete ban, employers will be
    barred from asking any new workers to sign noncompetes, and existing
    noncompetes would be made unenforceable for the vast majority of
    workers. Today I will highlight the importance of the rule by
    discussing the ubiquity of noncompete agreements and describing the
    effects these agreements have on wages, business formation, economic
    dynamism, labor mobility, productivity, innovation, and prices. I will
    also discuss options firms have to protect trade secrets without
    noncompetes, and the FTC's authority to ban noncompetes.

    Noncompetes Are Widely Used
        Noncompete agreements are ubiquitous. Many studies of workers find
    that roughly one in five workers are subject to noncompete agreements
    (see, for example, Starr, Prescott, and Bishara (2020);
    Balasubramanian, Starr, and Yamaguchi (2023); and Rothstein and Evan
    Starr (2021)). \1\
    ---------------------------------------------------------------------------
         \1\ Evan P. Starr, J.J. Prescott, and Norman D. Bishara,
    ``Noncompete Agreements in the U.S. Labor Force'', Journal of Law and
    Economics 64, no. 1 (October 2020); Natarajan Balasubramanian, Evan
    Starr, and Shotaro Yamaguchi, ``Employment Restrictions on Resource
    Transferability and Value Appropriation From Employees'', January 2023;
    Donna S. Rothstein and Evan Starr, ``Mobility Restrictions, Bargaining,
    and Wages: Evidence From the National Longitudinal Survey of Youth
    1997'', November 2021.
    ---------------------------------------------------------------------------
        My 2019 study with Alexander Colvin finds that more than one out of
    every four workers is subject to noncompete agreements. Using a 2017
    survey of a random sample of private-sector businesses with 50 or more
    employees, Colvin and I found that almost half (49.4 percent) of
    businesses required at least some employees to sign a noncompete
    agreement and almost one-third (31.8 percent) indicated that all
    employees were required to accede to a noncompete as a condition of
    employment. Based on these data, we estimate that at least 27.8 percent
    are subject to noncompete agreements. \2\ The higher share subject to a
    noncompete found in this survey compared with the other surveys cited
    above could be due to the fact that ours was a survey of business
    establishments, while the others are surveys of individual workers.
    While businesses know whether their workers are subject to noncompete
    agreements, workers are often asked to sign a noncompete on the first
    day of work when they are dealing with a great deal of administrative
    paperwork, and as a result often do not know or remember they are
    covered by a noncompete until they try to leave their job, and thus are
    likely to underreport being subject to them.
    ---------------------------------------------------------------------------
         \2\ Alexander J.S. Colvin and Heidi Shierholz, ``Noncompete
    Agreements: Ubiquitous, Harmful to Wages and to Competition, and Part
    of a Growing Trend of Employers Requiring Workers to Sign Away Their
    Rights'', Economic Policy Institute, December 2019.
    ---------------------------------------------------------------------------
        It is important to note that noncompete agreements are not limited
    to high-wage workers in knowledge-sensitive occupations and industries.
    My 2019 research with Alexander Colvin found that more than a quarter
    (29.0 percent) of private workplaces that had an average wage of less
    than $13.00 per hour used noncompete agreements for all their workers.
    \3\ Michael Lipsitz and Evan Starr (2021) note that ``while
    [noncompetes] are frequently assumed to occur only in high-wage jobs.we
    find that the modal worker bound by a [noncompete] is paid by the hour,
    with median wages of $14.'' \4\ And in their analysis of private-sector
    workers in 2017-2018, Rothstein and Starr (2021) reported that 14.4
    percent of workers who earned less than the equivalent of $20 per hour
    and 14.7 percent of workers with less than a college degree had signed
    a noncompete agreement (compared with 21.7 percent for those earning
    more than $20 per hour and 24.3 percent of college graduates). \5\
    ---------------------------------------------------------------------------
         \3\ Ibid.
         \4\ Michael Lipsitz and Evan Starr, ``Low-Wage Workers and the
    Enforceability of Noncompete Agreements'', Management Science 68, no.
    1, April 2021.
         \5\ Donna S. Rothstein and Evan Starr, ``Mobility Restrictions,
    Bargaining, and Wages: Evidence From the National Longitudinal Survey
    of Youth 1997'', November 2021.
    ---------------------------------------------------------------------------
        As noted by Starr, Prescott, and Bishara (2020)--who found that
    13.3 percent of labor force participants who earned less than $40,000
    per year in 2017 reported that they were subject to a noncompete
    agreement--``the frequency of noncompetes among low-wage employees
    without access to trade secrets and the lack of negotiation in the
    contracting process hint at more anticompetitive rationales for the use
    of noncompetes by employers.'' \6\
    ---------------------------------------------------------------------------
         \6\ Evan P. Starr, J.J. Prescott, and Norman D. Bishara,
    ``Noncompete Agreements in the U.S. Labor Force'', Journal of Law and
    Economics 64, no. 1, October 2020.
    ---------------------------------------------------------------------------
    Noncompetes Lower Wages
        To understand the impact of noncompetes on wages, it is useful to
    remember that essentially the only source of leverage an individual
    nonunionized worker has with respect to their employers is their
    ability to quit and take a job somewhere else. That ability means their
    employer has to provide a job that is competitive enough in terms of
    compensation, working conditions, and opportunities that the worker is
    not incentivized to leave to take another job or start their own
    business. Noncompetes cut that source of leverage off at the knees.
    When workers do not have the freedom to take another job, or start a
    business, in their line of work in their community, their employers
    simply don't have to pay them as much or treat them as well.
        A large and growing body of research bears this out. For example,
    using data from the Survey of Income and Program Participation, Evan
    Starr (2019) finds that an increase in enforcement of State noncompete
    laws (from nonenforcement to an average State's level of
    enforceability) is associated with a 4 percent decrease in hourly
    wages. \7\ Further, an analysis by Michael Lipsitz and Evan Starr
    (2021) of wage trends in Oregon after the State banned noncompete
    agreements found that wages for all hourly workers increased by 2-3
    percent on average. \8\
    ---------------------------------------------------------------------------
         \7\ Evan Starr, ``Consider This: Training, Wages, and the
    Enforceability of Covenants Not To Compete'', ILR Review 72, no. 4,
    August 2019.
         \8\ Michael Lipsitz and Evan Starr, ``Low-Wage Workers and the
    Enforceability of Noncompete Agreements'', Management Science 68, no.
    1, April 2021.
    ---------------------------------------------------------------------------
        It is worth noting that these studies show that noncompetes don't
    just lower the wages of those subject to noncompetes, they also lower
    wages of workers who have not signed such agreements. As described
    below, noncompetes decrease entrepreneurship and new firm entry, which
    increases local labor market concentration and depresses wages.
    Further, noncompetes make labor markets ``thinner,'' reducing the
    likelihood of a successful employer-employee match and driving down
    equilibrium wages.
        An analysis of data of the Noncompete Survey Project by Evan Starr,
    Justin Frake, and Rajshree Agarwal (2019) presents evidence that
    confirms this logic. Starr, Frake, and Agarwal ``find that in State-
    industry combinations with a higher incidence and enforceability of
    noncompetes, workers--including those unconstrained by noncompetes--
    receive relatively fewer job offers, have reduced mobility, and
    experience lower wages'' (emphasis added). \9\
    ---------------------------------------------------------------------------
         \9\ Evan Starr, Justin Frake, and Rajshree Agarwal, ``Mobility
    Constraint Externalities'', Organization Science 30, no. 5, July 2019.
    ---------------------------------------------------------------------------
        Noncompetes also appear to exacerbate racial and gender wage gaps
    by exerting larger wage effects on women and Black men than on White
    men. \10\
    ---------------------------------------------------------------------------
         \10\ Matthew S. Johnson, Kurt Lavetti, and Michael Lipsitz, ``The
    Labor Market Effects of Legal Restrictions on Worker Mobility'',
    National Bureau of Economic Research Working Paper no. 31929, December
    2023.
    ---------------------------------------------------------------------------
    Long-Run Wages and Employee Training
        Some have suggested that without noncompetes, firms will abandon
    investments in employee training and as a result, workers' wages will
    be lower in the long run. While evidence is mixed on whether
    noncompetes are associated with more training, it is worth noting that
    one reason noncompetes might lead to more training is that they shrink
    the pool of available workers with relevant experience, so employers
    are forced to hire less experienced workers that require more training.
    Evidence also suggests that on net, any gains in long-term wages
    workers may receive from additional training in a noncompete regime is
    more than offset by the wage suppressing effects of the noncompetes
    themselves. Balasubramanian et al. (2020) find that individuals who
    start a job in a State that enforces noncompetes see lower earning
    lasting over at least 8 years, compared to those who start a job in a
    State that doesn't enforce noncompetes. \11\
    ---------------------------------------------------------------------------
         \11\ Balasubramanian, Natarajan, Jin Woo Chang, Mariko Sakakibara,
    Jagadeesh Sivadasan, and Evan Starr. ``Locked in? The Enforceability of
    Covenants Not To Compete and the Careers of High-Tech Workers'',
    Journal of Human Resources, April 2020.
    ---------------------------------------------------------------------------
        It is also worth noting that employers who provide jobs with
    competitive wages, working conditions, and opportunities do not have to
    worry that their employees will defect to competitors en masse shortly
    after they receive valuable training.

    Noncompetes Reduce Business Formation, Dynamism, Labor Mobility, Pro-
          ductivity, and Innovation
        Some claim that though noncompetes reduce wages, they are still
    necessary because they boost innovation by incentivizing firms to
    invest in developing important advancements by reducing the ability of
    their workers to take valuable information about those advancements to
    a competitor. However, the best evidence consistently finds that on
    net, the effect of noncompetes on innovation is in the opposite
    direction.
        By preventing workers from leaving their employers to create new
    businesses, noncompete agreements reduce business formation, reducing
    dynamism in the economy. An analysis based on the findings in Jeffers
    (2024) \12\ shows that banning noncompetes will increase the rate of
    new business formation by 2.7 percent, which, in the U.S. economy,
    would translate into an additional roughly 8,500 new businesses
    annually.
    ---------------------------------------------------------------------------
         \12\ Jessica Jeffers. ``The Impact of Restricting Labor Mobility
    on Corporate Investment and Entrepreneurship'', The Review of Financial
    Studies, July 2024.
    ---------------------------------------------------------------------------
        Noncompete agreements also reduce job mobility--i.e., they keep
    workers locked in jobs--and, as a result, they reduce productivity
    growth by blocking the efficient reallocation of labor from less
    productive to more productive job matches. For example, Johnson et al.
    (2023) finds that noncompete agreements cause a significant decrease in
    job-to-job mobility. \13\ Eliminating noncompete agreements will allow
    workers to find firms, and firms to hire workers, that yield the most
    productive matches.
    ---------------------------------------------------------------------------
         \13\ Matthew S. Johnson, Kurt Lavetti, and Michael Lipsitz, ``The
    Labor Market Effects of Legal Restrictions on Worker Mobility'',
    National Bureau of Economic Research Working Paper no. 31929, December
    2023.
    ---------------------------------------------------------------------------
        Declines in business formation and labor mobility as a result of
    noncompetes contribute to an overall decline in innovation. A study by
    Johnson, Lipsitz, and Pei (2023), finds that an average-sized increase
    in the enforceability of noncompetes leads to an 110919 percent
    reduction in patenting--including reductions in ``breakthrough''
    inventions--over the following 10 years. \14\ Based on this research,
    it is estimated that banning noncompetes will lead to more than 17,000
    patents each year. Other research, for example Reinmuth and Rockall
    (2024), also find that noncompetes have a significant negative impact
    on patenting and innovation by ``reducing labor mobility as a channel
    of idea diffusion that increases overall innovation.'' \15\
    ---------------------------------------------------------------------------
         \14\ Matthew S. Johnson, Michael Lipsitz, and Alison Pei,
    ``Innovation and the Enforceability of Noncompete Agreements'',
    National Bureau of Economic Research Working Paper no. 31487, July
    2023.
         \15\ Kate Reinmuth and Emma Rockall, ``Innovation Through Labor
    Mobility: Evidence From Noncompete Agreements'', May 2024.
    ---------------------------------------------------------------------------
    Banning Noncompetes Will Reduce Inflation
        While eliminating noncompete agreements will raise wages, the net
    effect will likely be to reduce prices paid by consumers. Noncompete
    agreements increase concentration in the markets for goods and services
    by preventing workers from leaving their employers to create new
    businesses or join other firms that can increase the market supply and
    intensify competition. Banning noncompete agreements will reduce market
    concentration, thereby reducing market prices.
        Noncompete agreements also reduce productivity growth by blocking
    the efficient reallocation of labor from less productive to more
    productive job matches. Eliminating noncompete agreements will allow
    workers to find firms, and firms to hire workers, that yield the most
    productive matches. The increased firm and economywide productivity
    will reduce consumer prices.
        One area where direct evidence is available on the price effects of
    noncompetes is around the effect of noncompetes on prices in health
    care. Research shows that noncompetes significantly increase the cost
    of physician services (in particular, a 10 percent increase in the
    enforceability of noncompetes causes 4.3 percent higher physician
    prices). \16\ Based on that research, the FTC estimates that banning
    noncompetes will reduce health care costs by at least $74 billion over
    the next decade.
    ---------------------------------------------------------------------------
         \16\ Naomi Hausman and Kurt Lavetti, ``Physician Practice
    Organization and Negotiated Prices: Evidence From State Law Changes'',
    American Economic Journal: Applied Economics, Vol. 13, No. 2, April
    2021.
    ---------------------------------------------------------------------------
    Noncompetes Are Often Bundled With Other Restrictive Contracts
        Employers who require their workers to sign noncompete agreements
    are more likely to require their workers to sign additional restrictive
    contract provisions. My research with Alexander Colvin finds that over
    half of firms that require noncompetes for at least some of their
    employees also require at least some employees to agree to mandatory
    arbitration. \17\ Further, Balasubramanian, Starr, and Yamaguchi (2023,
    table 2) analyzed data from the 2017 version of Payscale.com's annual
    firm-level survey of publicly traded in the United States and found
    that almost one in four firms used noncompete agreements together with
    nondisclosure agreements, nonsolicitation agreements, and
    nonrecruitment agreements for all employees, while more than half used
    all four types of agreements for at least some of their employees. \18\
    ---------------------------------------------------------------------------
         \17\ Alexander J.S. Colvin and Heidi Shierholz, ``Noncompete
    Agreements: Ubiquitous, Harmful to Wages and to Competition, and Part
    of a Growing Trend of Employers Requiring Workers To Sign Away Their
    Rights'', Economic Policy Institute, December 2019.
         \18\ Natarajan Balasubramanian, Evan Starr, and Shotaro Yamaguchi,
    ``Employment Restrictions on Resource Transferability and Value
    Appropriation From Employees'', January 2023.
    ---------------------------------------------------------------------------
        The reflexive bundling of noncompetes with mandatory arbitration,
    nondisclosure, nonsolicitation, and nonpoaching agreements provides
    further evidence that the primary purpose of noncompetes is often to
    restrict employee options rather than being a tailored strategy for
    protecting beneficial investments in and information held by employees.
        Relatedly, and as John Lettieri highlighted while employed at the
    American Enterprise Institute, workers often enter into noncompete
    agreements after little or no bargaining with their employer and
    without full information about the rights they are signing away:

            The vast majority of noncompete agreements are not subject to
            any negotiation between the employer and employee, suggesting
            that the employee is unlikely to receive any benefits in return
            for their signature. A large share of these agreements are
            presented for signature only after the employee has already
            accepted the job offer--often on the first day of work.
            Employers frequently exploit workers' lack of knowledge and
            resources when crafting noncompetes. For example, employers
            commonly request that workers sign noncompetes even in States
            where they are completely unenforceable--and workers
            nevertheless sign the agreements assuming they are valid.
            Likewise, employers often craft extremely broad provisions
            knowing that employees generally lack both an understanding of
            what is enforceable and the wherewithal to challenge the terms
            in court. \19\
    ---------------------------------------------------------------------------
         \19\ John W. Lettieri, ``A Better Bargain: How Noncompete Reform
    Can Benefit Workers and Boost Economic Dynamism'', American Enterprise
    Institute, December 2020.
    ---------------------------------------------------------------------------
    Employers Who Need To Protect Trade Secrets Have Other Options
        Employers do not need noncompete agreements in order to protect
    trade secrets. California, for example, made noncompete agreements
    unenforceable in 1872, but the State has still become a global
    technology hub--something that would be difficult to imagine if
    businesses in California faced misappropriation of trade secrets and
    other confidential information at a meaningfully higher rate than in
    other States.
        That is because there are intellectual property laws that provide
    businesses with significant legal protections for trade secrets.
    Further, employers are still able to use tailored nondisclosure and
    nonsolicitation agreements. Policies like these, that directly address
    what employees may and may not do with company secrets, allow
    businesses to protect trade secrets while not harming competition by
    taking away workers' freedom to seek other work or to start a business
    after they leave their job.
        And of course, employers concerned about worker departure and the
    associated loss of firm knowhow and knowledge can retain staff by
    paying fair wages and salaries and treating them with respect. Many
    employers do not use noncompete clauses and have had no difficulty
    keeping employees using these salutary methods.

    The Broad-Based Nature of the FTC's Rule Is Important
        The FTC's rule is a complete ban on new noncompetes for nearly all
    workers, including independent contractors and senior executives, while
    existing noncompetes for the vast majority of workers will no longer be
    enforceable (a key exception is senior executives, for whom already
    existing noncompetes will be allowed to remain in force--this group
    represents less than 1 percent of all workers).
        Some have questioned whether it is reasonable to ban noncompetes
    for senior executives or other highly paid workers, who may be
    particularly likely to have confidential information. But as mentioned
    above, employers do not need noncompete agreements to protect trade
    secrets, because they have other options. And while senior executives
    or other highly paid workers are likely in a much better position than
    other workers to negotiate over their full employment package--
    including restrictive agreements like noncompetes--and are therefore
    less likely to themselves be made worse off by noncompetes, the broader
    economic harms caused by noncompetes mentioned above are still present,
    including reduced business formation, economic dynamism, labor
    mobility, and productivity, and increased inflation. Many of these
    harms may in fact be stronger as a result of noncompetes among this
    group than among other workers, as, for example, workers in this group
    may be more likely than other workers, in the absence of noncompetes,
    to be in the position to start a new firm, and to innovate and grow it.
        It is also important that new noncompetes are banned under the
    rule, not just made unenforceable. The very existence of a noncompete,
    even if it could not ultimately be enforced, can deter workers from
    going to work for, or starting, a competing business. The high costs--
    financial and otherwise--of noncompete-related litigation means
    noncompetes create a chilling effect on new firm formation and worker
    mobility that exists whether or not the noncompete would be enforced by
    a court. Notably, the chilling effects of unenforceable noncompetes do
    not just deter workers from going to work for, or starting, a competing
    business, they can also deter other businesses from hiring a worker who
    had been working for a competitor and had signed a noncompete, due to
    fear of legal complications.

    FTC Has the Authority To Ban Noncompetes
        Business groups suing to block the FTC's noncompete rule have
    claimed that the FTC does not have the authority to ban noncompetes.
    But as a Federal judge in Pennsylvania stated last Tuesday in a
    decision declining to issue a preliminary injunction against the rule,
    ``the FTC is empowered to make both procedural and substantive rules as
    is necessary to prevent unfair methods of competition.'' \20\
    ---------------------------------------------------------------------------
         \20\ Tomasz Mielniczuk and Craig Minerva, ``FTC's Noncompete Ban
    Survives Preliminary Challenge in Pennsylvania Federal Court'', JD
    Supra, July 26, 2024.
    ---------------------------------------------------------------------------
        The FTC Act states that unfair methods of competitions are illegal,
    and it authorizes the FTC to issue rules and regulations to prevent
    their use. Further, the Supreme Court in 1986 confirmed that the FTC
    can not only challenge traditional antitrust violations but can also
    outlaw practices ``the Commission determines are against public policy
    for other reasons.'' \21\ With the noncompete rule, the FTC is doing
    exactly what it was empowered (and directed) to do by the FTC Act--take
    action, based on the best evidence available, to protect fair
    competition.
    ---------------------------------------------------------------------------
         \21\ Federal Trade Commission (FTC), ``Section 5 of the FTC Act as
    a Competition Statute'' (web page), October 17, 2008.
    ---------------------------------------------------------------------------
        Noncompetes are not trying to hide that they are contrary to open
    and fair competition--it's in their name. They bar workers from leaving
    to accept a position in their line of work in their community, stifle
    the creation of new businesses, and depress employer competition for
    workers' services. There is a large body of evidence, described above,
    that noncompetes hinder competition, disadvantaging consumers, workers,
    and competing businesses. Banning these coercive and unfair agreements
    is fundamental to the FTC's mandate.

    Conclusion
        In closing, it's worth considering who wins from having
    noncompetes. One might believe it is businesses who want to protect
    trade secrets--but, as described above, noncompetes are not needed for
    that; firms have other options for protecting their intellectual
    property.
        A core group that does indeed benefit from noncompetes is existing
    firms who want to stop new firms from forming and competing with them.
    Noncompetes strongly benefit those incumbent firms who want to protect
    their advantage, but they make it harder for new firms to start, grow,
    and innovate, and, as a result, they are bad for consumers and the
    overall economy, both of which benefit from competition and innovation.
        Another group that benefits from noncompetes is existing firms who
    want to prevent other firms from being able to hire away their workers
    by offering them higher wages, better working conditions, and better
    opportunities. Noncompetes clearly benefit those incumbent firms, but
    are harmful to workers and the overall economy, both of which benefit
    from employer competition for workers' services.
        Given all this, it is not a surprise that groups representing
    existing businesses are fighting tooth-and-nail to keep their ability
    to require workers to sign noncompetes. That, however, does not mean
    noncompetes are good for the Nation. In fact, noncompetes are bad for
    economic dynamism and innovation, they depress business formation and
    labor mobility, they hurt productivity and growth, they raise prices,
    they shrink for workers' wages, and they restrict workers' freedom.
    Banning these coercive and unfair agreements is fundamental to the
    FTC's mandate, and the workforce, consumers, and the broader economy
    will be better off for it.
        Thank you for holding this important hearing and I look forward to
    your questions.
                                     ______

                    PREPARED STATEMENT OF R. JAMES TOUSSAINT
                          MD FAAOS, Orthopedic Surgeon

                                 July 30, 2024

        Good afternoon Chair Warren, Ranking Member Kennedy, and Members of
    the Subcommittee. Thank you for inviting me. I am here to discuss my
    experience with noncompete agreements from a physician's perspective.
    It is an honor to share my story with you today.
        My name is Rull James Toussaint. I have spent 2 years at the
    University of Florida where I am an orthopaedic surgeon. I would like
    to state for the record that the opinions expressed herein are my own
    and do not reflect the views or positions of the University of Florida
    or University of Florida Health.
        I was born in Haiti, and emigrated to Florida where I learned to
    speak English while excelling in academics. I achieved the American
    dream when I was the first in my family to be accepted to college at
    the University of Chicago. Thereafter, I went to work on Wall Street in
    an effort to pay off my student loans. After an additional 4 years of
    hard work, I was blessed to be accepted to medical school at NYU where
    I was among the top of my class. As a result, I matched at Harvard
    University's prestigious orthopaedic surgery residency program and
    subsequently completed an orthopaedic foot and ankle fellowship at
    Ortho Carolina in Charlotte, North Carolina. At this point, my life
    goal was simple: to return to Florida as a well-trained orthopaedic
    surgeon who would treat his community, including the underserved.
        In 2014, I returned to Florida and joined a private practice
    multispecialty musculoskeletal group as their only foot/ankle-trained
    orthopaedic surgeon. In fact, at the time, I was only one of two
    orthopaedic surgeons with this expertise across a dozen mostly rural
    counties in Florida, serving over 850,000 people.
        Over the next few years, the partners of my practice and I felt the
    pressures of decreasing reimbursements from insurance companies coupled
    with the increased burden of pre-approval requirements from insurers,
    as well as intense competition from other practices. We felt that an
    infusion of capital was necessary to remain competitive. As a result,
    the partners entered into a purchase agreement with a private equity
    firm headquartered in California. The deal closed in 2017.
        Although I am legally bound from disclosing the terms of the
    transaction, I can say that it included a restrictive covenant (i.e., a
    noncompete clause). Per the noncompete, I would be restricted from
    practicing orthopaedic surgery within 25 miles of:

      1.  Any facility in which the group is currently providing medical
            services;

      2.  Any facility in which the group has previously provided medical
            services;

      3.  Any facility in which the group has targeted for expansion within
            the entire State of Florida, or;

      4.  Any facility the group was in discussions with related to a
            potential acquisition.

        This noncompete clause was valid for 2 years from the date of
    termination of employment for any cause.
        At this point, one might wonder why we would sign such a deal. The
    reality is that the nuances of the noncompete were not known until we,
    the doctors, had spent hundreds of thousands of dollars in transaction
    expenses related to the acquisition. As a group, we felt backed into a
    corner and believed our only choice was to proceed with the transaction
    in good faith.
        Unfortunately, one of the private equity group's first actions
    after the deal was set was to install its own board and management
    team. The private equity group promised us that the new management team
    would have years of orthopaedic expertise. Unfortunately, none of the
    new leadership had any notable experience with running an orthopaedic
    practice.
        Within months after the deal's closing date, the morale of the
    physicians and their staff changed for the worse. Many of the long-time
    employees were laid off or fired to make room for new hires by the
    private equity group. This led to patient dissatisfaction and
    significant disruptions in the physicians' day-to-day clinical
    practice.
        Next, instead of cost savings, the practice's overhead expenses
    increased significantly. The increase was due to more layers of
    administrators, management fees, and millions of dollars of debt. The
    overhead increased so substantially that some physicians not only did
    not receive a paycheck, but instead actually paid the group to work,
    despite the physician taking on all the risks and responsibilities of
    patient care. After endless complaints from the physicians about the
    insurmountable overhead expenses, the private equity group finally
    responded. To the physicians' dismay, one of the methods of cost
    savings was to change malpractice coverage to a lower-tier, less-
    expensive insurance carrier.
        Furthermore, the physician take-home pay decreased dramatically. As
    previously mentioned, some doctors indeed had to pay for the privilege
    to work. Unfortunately, some doctors were tempted to find other ways to
    pay their overhead. All the while, the cost to the patients continued
    to rise while they noticed their quality of care decreased. I had many
    patients complain to me about surprise billing and unexpected increases
    in their medical bills, as well as how they were unhappy with their
    treatment outcomes from overworked surgeons.
        Since the private equity deal closed, nearly half of the group's
    original partners left the group. To save face, the private equity
    group's management team would lie to patients and say that the doctor
    retired, even though the doctor had not actually stopped practicing
    medicine. In my case, I was disillusioned by private equity's
    mismanagement of the practice and the group's focus on dollars instead
    of the quality of health care. I eventually put in my resignation
    letter highlighting my intention to leave private practice and enter
    academic medicine at the nearby nonprofit State-run institution. This
    decision made sense given that the only other orthopaedic foot and
    ankle subspecialist in the entire region was retiring, and I would be
    able to help educate the next generation of surgeons in my specialty.
    Despite this, the private equity group quickly sued to enforce the
    noncompete agreement to prevent me from practicing medicine at another
    facility. It did not matter to the private equity group that the local
    community and entire region--an already underserved community--would
    not have a specialist surgeon to care for their injured patients.
        It did not matter to the private equity group that the academic
    medical center was the only provider of orthopaedic care for the
    Medicaid patients in the region and without me, the Medicaid patients
    would have to travel hours away for treatment.
        And finally, it didn't matter to the private equity group that the
    State of Florida had enacted a statute (Chapter 542 Section 336)
    stating that if one entity employs all physicians who practice a
    particular medical specialty in a county, then restrictive covenants
    the entity enters into with those physicians are void and
    unenforceable.
        Despite all of what I stated, within days of my leaving the
    practice, the private equity group threatened legal action to prevent
    me from entering academic practice. Despite the existing State of
    Florida statute negating the enforceability of the noncompete, the
    private equity firm's goal was clear. Their goal was to wage an
    expensive and prolonged legal battle in the hopes that I would
    capitulate and leave my community even before a final judgment was
    rendered.
        After a 4-month dispute, a legal settlement was achieved, and I was
    able to join the faculty at the university. Not surprisingly, many
    patients from the private practice who seek my care at the university
    tell me of the frustrations they encountered when they called the old
    practice trying to find me. They said that the private equity group
    lied to them and stated I retired from medicine or left the State.
        Because of my concerns with PE and health care, including their use
    of noncompete agreements, I'm a member of the Coalition for Patient-
    Centered Care (CPCC). CPCC represents a diverse group of health care
    industry stakeholders who stand together in opposition to private
    equity's acquisition and influence over independent physicians that can
    result in an emphasis on profits and revenue growth over patient
    interests. We call on other stakeholders who share our concerns about
    PE to visit our website at www.patientcenteredcare.com, follow us on
    Twitter/X@CPCC--America and our LinkedIn page to join our cause.
        Unfortunately, I have experienced the negative consequences that
    noncompete agreements have on patients, physicians and communities. My
    noncompete agreement restricted my ability to care for patients, and
    restricted patients' ability to seek medical care. I have concluded
    that these restrictive covenants negatively impact patient access to
    physicians, limit the quality of care, and increase costs to all
    parties. I look forward to the FTC's Noncompete Rule going into effect,
    because I know firsthand that banning noncompete agreements will
    benefit both physicians and their patients.
                                     ______

                       PREPARED STATEMENT OF HAYLEY PAIGE
               Small Business Founder and Wedding Dress Designer

                                 July 30, 2024

    Introduction
        I am Hayley Paige, a wedding dress designer and the cofounder of
    SHE IS CHEVAL. From a young age, I was destined to design wedding
    dresses. My journey through childhood, education, and industry
    experience was dedicated to perfecting my craft and bringing joy to
    women through my designs. Wedding dress design is my identity, passion,
    and contribution to society.
        The bridal fashion industry and brides embraced me. My designs
    graced the racks of over 250 stores, including Nordstrom and
    Anthropologie, and gained international acclaim. I was featured on
    ``Say Yes to the Dress'' and named one of Vogue's Top Ten bridal
    designers. The success and recognition I achieved were a testament to
    my dedication, hard work ethic, and the American Dream.
        However, my journey took a harrowing turn when I faced a
    restrictive noncompete clause. This clause not only stifled my ability
    to work but also shook my faith in the justice system, left me
    financially devastated, and prevented me from designing and sharing my
    creativity with brides across the country. My experience underscores
    the critical need to ban noncompete agreements, which hinder
    creativity, suppress innovation, and restrict the potential of
    individuals and the economy.
        This testimony reflects my personal battle and magnifies why
    banning noncompete agreements is essential for fostering a vibrant,
    competitive, and innovative economy.

    Background and Personal Experience
        In 2011, at the age of 25, I signed an employment contract that
    included a noncompete clause. At the time, I believed this noncompete
    was reasonably restricted to the duration of my employment. The
    contract seemed like the opportunity of a lifetime, and I felt
    compelled to accept its terms or I would lose the opportunity entirely.
    The imbalance of negotiation power and my intimidation by the prospect
    of hiring an expensive lawyer left me vulnerable. I could not foresee
    how this contract--including a separate intellectual property clause--
    would later be interpreted to strip me of my ability to use my own
    birth name, threaten my connection to women worldwide, stifle my skill
    set, and rob me of my livelihood.
        My contract did not just impose a restriction during my employment
    but, as I later discovered, was interpreted in a way that limited my
    ability to practice my chosen trade in the future. In essence, to
    secure my dream job, I forfeited my dream once that job ended--or in my
    case, once my former employer sued me in Federal court.
        In 2020, I faced a lawsuit and subsequent injunction that
    prohibited me from using my own birth name in commerce and required me
    to relinquish control of my personal social media accounts, including
    my Instagram account which had grown to over 1 million followers. I was
    also barred from working in my chosen field for 5 years because of a
    noncompete provision. Without question, the noncompete provision was
    the most devastating of the three. I could start over with a new name,
    I could open new social media accounts and rebuild, but I could not
    work in my chosen craft.
        While this was shocking and devastating, I refused to succumb to
    victimhood. I publicly changed my name to Cheval and started a new
    Instagram account. However, the notion of having to learn an entirely
    new trade after dedicating my life to this industry was unconscionable
    and unjust.
        This lawsuit, coupled with the broad interpretation of my contract,
    led to a three-and-a-half year long legal battle that led me to incur
    millions of dollars in legal fees--an amount far beyond what many
    individuals (myself included) could afford. I spent every dollar I ever
    earned designing wedding dresses to fight for my right to do so once
    again.
        Being stripped of the talent I had worked so hard to cultivate and
    encourage has shown me how devastating noncompetes are to personal
    development and the economy.

    Impact of the Noncompete
        Where I once found creative freedom and incentive to advance, I
    soon encountered unreasonable confines that limited my freedom of
    speech and my ability to publicly practice a trade I had passionately
    cultivated since childhood. More dramatically, I was limited in my
    creative expression on social media due to the broad interpretation of
    my contract. At one point during my litigation, I was even held in
    contempt of court for sketching dresswear on social media. This harmful
    restriction on my personal expression was a stark threat to my First
    Amendment rights.
        The residual stress my situation caused brides was devastating to
    witness. Many women who had followed my personal social media account,
    @misshayleypaige, from its inception and watched me interact with all
    types of brides on ``Say Yes to the Dress'' had their own diverse
    dreams of one day choosing a Hayley Paige gown for their most special
    day. The harsh reality was that they were no longer getting a dress
    from me, the designer they personally connected with and inspired, and
    there would be no new dresses to choose from. This tarnished what
    should have been an emotional and genuine purchase.
        Moreover, the noncompete adversely affected bridal retailers who
    had financially invested in my collections on the premise that I would
    be the designer providing the work. Many refused to support new Hayley
    Paige collections that were not designed by me. The market, which
    demands the freshest and most dazzling designs twice a year during
    bridal fashion week, was deprived of healthy competition. The industry
    lost the benefit of my creative contributions and a unique design
    aesthetic not practiced by other designers in the industry.

    Broader Implications and Unfairness
        My case exemplifies how noncompetes can be weaponized to the
    detriment of individuals and industries. The broad interpretation of
    these agreements leads to outcomes that stifle creativity and
    innovation. While I had the rare resources to fight for my rights and a
    legal team that was willing to keep fighting when my financial
    resources ran dry, many others do not share that privilege. Individuals
    like myself are often at a stark financial disadvantage to those
    seeking to enforce noncompetes. The financial and emotional toll of the
    legal battle alone is a burden that most people cannot bear, making
    this issue all the more pressing.
        Noncompetes are detrimental not only to high-profile professionals
    but to workers across all sectors. They hinder economic growth by
    preventing talented and hardworking individuals from contributing to
    the marketplace, which stifles competition. If we want to encourage
    innovation and ensure that the American Dream remains accessible, we
    must eliminate these restrictive practices.
        Living in a country where freedom and fairness should ring true, I
    want to demonstrate how noncompetes operate shamelessly on a one-way
    highway: if we are not limiting competition among corporations, why are
    we limiting it among individuals? As I sought a way forward in my
    lawsuit, I started a small business and, as a founder, I depend on
    competition to inspire and elevate my performance.
        Another example of this one-way highway is the unilateral benefit
    for corporations to continue hiring and profiting, while the employee
    is restricted from working and earning a living. In my situation, I was
    replaced by a new designer who took over my brand and collections in a
    matter of months, but I was restricted from making a living doing what
    I had dedicated my life to for years.
        Due to the broad interpretation of my employment contract, my
    life's work and passion were halted. All my hard work seemed to amass
    an unreasonable debt, requiring me to sit on the sidelines and cease my
    progress. The idea that my contribution to society was no longer my
    choice or in my hands was unfathomable.

    Alternative Protections and Innovation
        The last area I wish to focus on with respect to the threat
    noncompetes pose to our economy is the plethora of thoughtful ways to
    protect intellectual property without stifling innovation and personal
    growth. Nondisclosures and privacy policies allow corporations to
    safeguard valuable trade secrets effectively. These measures can be
    implemented without resorting to harmful noncompetes or preventing
    people from working, earning a living, and pursuing their passions.
        As a small business founder and capitalist, I fully recognize the
    importance of protecting sensitive information. But I firmly believe in
    our ability to achieve this while also allowing individuals to continue
    working and contributing to their fields. We can preserve corporate
    interests without constraining the creative and entrepreneurial spirit
    that drives our economy.
        States like California have already banned noncompete agreements,
    serving as proof that innovation and economic growth can thrive without
    these restrictive clauses. Silicon Valley, an area I grew up in, is a
    testament to the power of human intelligence and greatness. Imagine the
    stagnation that would ensue if we were to stifle that innovation with
    noncompetes. Healthy competition is not only beneficial but essential
    for a robust and dynamic economy.
        In my previous employment role, I signed a nondisclosure agreement
    to protect the company's financial and other sensitive information.
    This demonstrates that there are already effective tools in place to
    safeguard corporate interests without hindering individuals' careers.
    Noncompetes are an unnecessary and harmful redundancy.

    Conclusion
        My experience of being constrained by a noncompete clause has
    profoundly reinforced my belief in the necessity of banning these
    provisions. Often disguised as genuine agreements, they are harmful
    tools that undermine fair competition and threaten the American Dream.
    These provisions silence voices, stifle creativity, and suffocate the
    entrepreneurial spirit that has always driven our Nation forward.
        Imagine a world where the next great innovation is left unrealized,
    where the brightest minds are left idle, and where the American Dream
    is nothing more than a distant memory. This is the world noncompetes
    create--a world where potential is capped and progress is halted. We
    owe it to ourselves and to future generations to dismantle these
    barriers and build a marketplace that thrives on the free exchange of
    ideas and the relentless pursuit of excellence. If the next great
    American inventor, creator, or entrepreneur is constrained by a
    noncompete, it is likely that innovation will happen elsewhere and
    America will fall behind.
        I urge the Committee to consider the broader implications of
    noncompete clauses. These agreements do more than restrict individual
    careers; they erode the very foundation of a free and dynamic economy.
    They are antithetical to the spirit of competition and innovation that
    defines us as a Nation.
        Let us champion measures that promote a more equitable and vibrant
    marketplace, one where every individual has the chance to pursue their
    passions, contribute to their industries, and drive economic growth.
    Let us create an environment where talent and hard work are rewarded,
    where dreams are not deferred but achieved, and where the American
    Dream is not just a promise but a reality for all.
        In the words of the great Robert F. Kennedy, ``Each time a man
    stands up for an ideal, or acts to improve the lot of others, or
    strikes out against injustice, he sends forth a tiny ripple of hope.''
    Let us be those ripples. Let us stand up for what is right. And for
    sparkle sakes, let the girl design a dress.
        Thank you.
                  Additional Material Supplied for the Record

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