Lina Khan Fights For Workers’ ‘Liberty’ Amid Attacks From Democratic Donors

WASHINGTON — In over three transformative years as the country’s top antitrust regulator, Federal Trade Commission Chair Lina Khan has faced down powerful foes, from private equity titans to tech CEOs and supermarket moguls.

But Khan, nominated by President Joe Biden and confirmed by a bipartisan Senate supermajority, now faces adversity from a less familiar corner: allies of Vice President Kamala Harris, the newfound Democratic presidential nominee and a Californian with closer ties to Silicon Valley than Biden.

Reid Hoffman — a co-founder of LinkedIn, a venture capitalist and one of the Democratic Party’s largest donors — is among the prominent Democrats calling for Harris to ditch Khan. His comments last month pushing for her ouster, along with similar remarks from billionaire donor Barry Diller, set off a low-level civil war between the party’s ideological wings.

Progressives are increasingly confident that Khan — or at least one of her ideological allies — will remain at the top of the FTC, especially after Harris’ first economic speech Friday showed her aggressively attacking corporate greed and proposing new powers for the commission.

But as the Harris campaign decides whether, and how much, to break with Biden’s populist anti-monopoly policies, Khan is engaged in a high-profile fight for workers’ rights, showcasing the broad appeal of her aggressive approach to enforcement and precisely why Harris might want to keep her in the job.

Khan’s most ambitious initiative is a rule banning the use of noncompete agreements barring workers from getting a job with a competitor of their current employer, or leaving to start such a company themselves. It’s a policy that polls well, has bipartisan support in Congress and even elicited kind words from Hoffman.

If successful, Khan’s decision would free the 1 in 5 American workers — 30 million people, from fast-food workers to doctors — currently unable to pursue new employment opportunities and start new businesses.

That’s a big “if,” though. The rule, approved in April and slated to take effect Sept. 4, is subject to aggressive legal challenges likely to end up before the U.S. Supreme Court this fall.

The FTC has taken some solace in the fact that even conservative federal judges exempting plaintiffs from the rule, including Judge Timothy Corrigan in the Middle District of Florida on Wednesday, have thus far declined to halt the rule for all employers across the country.

Khan is nonetheless taking her case to the public with an appeal to the cross-ideological American ideal of “liberty” — a theme that incidentally rhymes with the Harris campaign’s focus on “freedom.”

“If you’re a champion for liberty, you should be against noncompetes,” Khan told HuffPost in an interview conducted before Harris became the Democratic nominee. “These noncompetes are really restricting people’s ability to easily switch jobs, and that undermines their core economic liberty piece, but it also undermines a more fundamental sense of liberties.”

The FTC elicited more than 26,000 comments during a public comment period before it finalized the noncompete ban, the overwhelming majority of which were from workers and employers lamenting the onerous toll of noncompete agreements.

As evidence that the agreements undermine personal liberties as well as economic ones, Khan noted some conservative-friendly personal stories: people whose speech was chilled in their current job, whose job did not suit their religious needs, or who were fired for refusing to get vaccinated and are now unable to seek a job in the same field.

Khan’s focus on promoting liberty and market competition has found some receptive ears on the right, including Sen. JD Vance (R-Ohio), the running mate of GOP presidential nominee Donald Trump (though it’s not clear if Vance has commented on noncompete bans specifically).

Rep. Matt Gaetz (R-Fla.), a right-wing attorney and Trump loyalist with an anti-monopolist streak, submitted an amicus brief in defense of the legality of the noncompete ban in early June.

“Economic liberty is the foundation of a free society and the bedrock of American democracy,” wrote Gaetz, a member of the House Judiciary Committee. “The promise that hard work, competitive vigor, and individual effort will be rewarded with prosperity is one that has flourished in America from the very beginning.”

The policy idea of a national noncompete ban, without any exceptions, has bipartisan support in the Senate as well. Sens. Chris Murphy (D-Conn.), Todd Young (R-Ind.), Kevin Cramer (R-N.D.) and Tim Kaine (D-Va.) have introduced legislation banning noncompetes in nearly all cases. The bill’s passage, which is a nonstarter in this Congress and unlikely in the next few years, would have the advantage of being harder for a new president to overturn.

Members of Congress cannot directly affect how a judge will rule, but the overall political environment can sometimes influence jurists’ thinking in subtle ways, and predict congressional responses to a particular opinion from the bench.

In the hopes of gauging other lawmakers’ support for Khan’s stance, HuffPost surveyed members of Congress about the ban.

Of those who commented, their responses can be divided into three categories: full support for the noncompete ban, support for the ban with some exceptions, and outright opposition.

Multiple Democrats were firmly in Khan’s corner. Chief among them was Sen. Elizabeth Warren (D-Mass.), who let out an excited “yes” as HuffPost was outlining the question. A consumer rights attorney, Warren said that “there’s no doubt” the FTC has the authority to issue the rule.

“When a fast-food joint forces someone who runs the cash register to sign a noncompete so they won’t go work for some other fast-food place for 50 cents more, that’s just straight up anticompetitive,” she added.

Rep. Bill Foster (D-Ill.), a physicist and entrepreneur who co-founded a successful theater lighting manufacturer, cited personal experience to argue for the ban. Noncompete agreements “do more harm than good,” he said, noting his disappointment with a former barber who imposed a noncompete agreement on an employee that prevented the employee from starting their own barbershop.

Rep. Adam Smith (D-Wash.) and Sen. Brian Schatz (D-Hawaii) had similar assessments, with Schatz calling noncompete agreements a “distortion of the marketplace” and Smith lamenting how employers are “sucking up every advantage they possibly can.”

Sens. Ben Cardin (D-Md.) and Tina Smith (D-Minn.) spoke about their aversion to noncompete agreements overall, but suggested they saw a use for them under certain circumstances.

“Some of these noncompetes are terrible abuses, so I’m glad to see they’re taking them up,” Cardin said.

Smith described noncompete agreements as “just a way to put power in the hands of employers and take away the power of employees.” The binding accords for fast-food workers, for example, are “essentially a way of big corporations controlling what regular people do,” she said.

But Smith also had a caveat that she declined to elaborate on. “Certainly there are examples we can all come up with where somebody has confidential business information and they would be a direct threat to their former employer,” where a noncompete agreement would be appropriate, she said.

Rep. Glenn Ivey (D-Md.), a former local prosecutor, likewise seemed supportive of a less comprehensive ban.

“There’s certainly an abusive extent to which they’ve been imposed on especially folks without much contract power in these negotiations,” Ivey said. “So as a policy matter, restricting them to some extent made sense.”

A number of the six Republican lawmakers interviewed by HuffPost shared the view of those Democrats who are wary of the burdens that noncompete agreements place on lower-earning workers.

Along with New Hampshire Democratic Sen. Maggie Hassan, Sen. Marco Rubio (R-Fla.) introduced a bill in February 2023 banning noncompete agreements for certain low-wage workers.

Noncompete agreements “have value in certain professions where you have, for example, industry ties, proprietary information that could be taken to the benefit of one of your competitors,” he told HuffPost. “It makes sense in that regard, but it doesn’t make sense for some of the blue-collar, working-class jobs that it’s been applied to in some jurisdictions, literally preventing some people in the construction trade” from finding a new job, he said.

Twenty-one Senate Republicans joined 48 members of the Senate Democratic Caucus in voting to confirm Khan in June 2021. Rubio was one of three senators who did not vote on Khan’s nomination. (The other two absences were Democrats).

“In some cases [noncompetes are] … needed to protect effort you’ve invested in something, but generally I don’t like them, because I like full competition and transparency,” said Sen. Mike Braun (R-Ind.), the founder of an automotive parts distributor who also voted to confirm Khan. “It’s been especially problematic for doctors and professionals, where they have to sign noncompetes and then are trapped in a corporate kind of prison.”

Both Rubio and Braun said they would prefer that Congress pass legislation banning noncompetes rather than having the FTC act independently.

Sen. Josh Hawley (R-Mo.), who voted to confirm Khan and is a prominent Republican proponent of anti-monopoly policy, told HuffPost that he’s “generally pretty skeptical of noncompetes,” because they “get used a lot to hurt workers.” He declined to opine on the legal merits of Khan’s action.

At the same time, many Republicans in Congress, including Rep. Byron Donalds (R-Fla.) and Sen. Mike Lee (R-Utah), retain a libertarian aversion to federal intervention in private business.

“The Federal Trade Commission is not there for intrastate contracts. Miss me with all of that,” said Donalds, a former financial analyst. “So essentially an NDA is signed by two parties over the actions within the state, and the federal government’s going to regulate that? I’m sorry.”

Lee, an attorney, likewise said that the FTC lacks the authority for the rule and that noncompete agreements should be left to the states.

“Things like employment law are normally questions of state law, not federal law,” said Lee, who voted against confirming Khan.

The FTC’s final noncompete ban allowed existing noncompete agreements with senior executives — defined as workers in a policymaking position earning more than $151,164 — to stand. Companies would not have a carve-out for such workers going forward, however.

That’s because higher-earning workers are no less deserving of employment mobility, especially since they are among the employees most likely to start new businesses, according to Khan.

California is one of four states in the country that already have bans on all noncompete agreements, Khan noted to HuffPost. The state’s status as home to the Silicon Valley tech corridor suggests the rules encourage, rather than inhibit, innovation, she argued.

“When you have a more informal diffusion and sharing of information, it can have really beneficial effects for innovation,” Khan said.

When it comes to the legal argument, the plaintiffs suing to stop the noncompete rule, such as Ryan LLC, a Dallas-based tax services company, contend that the FTC has the power to issue new “procedural” rules to shape how it enforces restrictions on practices that Congress has designated “unfair,” but not “substantive” rules that effectively deem certain practices unfair in the first place.

But Khan and the FTC underscore that two previous federal circuit court rulings have upheld the agency’s authority to issue substantive rules as well.

“We live under the rule of law. You’re supposed to follow the existing precedent,” Khan said.

Conservative federal judges, of course, seem to have few qualms about dispensing with long-standing precedent — especially around the federal government’s authority to regulate business.

A conservative judge in the Northern District of Texas ruled partially in favor of Ryan LLC and its co-plaintiffs in early July, issuing a preliminary injunction blocking the rule from taking effect for the plaintiffs.

In her opinion, the judge, Trump appointee Ada Brown, nonetheless declined to stay the rule for all companies across the nation. And while Brown exempted Ryan LLC and its fellow plaintiffs — the U.S. Chamber of Commerce, Business Roundtable, the Texas Association of Business, and the Longview Chamber of Commerce — from complying with the noncompete ban, the trade groups’ member companies would not be exempt.

Brown also wrote that she would issue a ruling on the “ultimate merits” of the FTC’s action — that is, whether to halt the rule for all companies across the country — by Aug. 30.

For his part, Corrigan, the federal judge in Florida, made clear Wednesday that his decision applies only to the plaintiff, Properties of the Villages Inc., and nothing about his decision would prevent the FTC rule from taking effect nationally Sept. 4.

Meanwhile, there is already a competing ruling from a liberal judge. Judge Kelly Brisbon Hodge in the Eastern District of Pennsylvania upheld the rule against a challenge in late July.

Regardless of how Brown rules, her decision is sure to be appealed to the even more conservative 5th U.S. Circuit Court of Appeals, and then to the U.S. Supreme Court, which begins its next session Oct. 7.

Given the conservative Supreme Court’s tendency to side with big business over the regulatory state, a favorable ruling for the FTC seems improbable.

But in the meantime, the rule might take effect and prompt businesses to adopt practices they might not undo right away. Khan’s allies in the world of anti-monopoly policymaking believe that, one way or another, the combined journalistic, congressional and regulatory scrutiny on the harms caused by noncompete agreements means the employment restrictions are not long for this world.

“Even if the FTC rule is overturned, there are still many other efforts afoot to undermine the use of these agreements,” said Lee Hepner, senior legal counsel for the American Economic Liberties Project, an anti-monopoly think tank that’s supportive of the noncompete ban. “It’s a multipronged strategy.”