Business
Column: A Trump judge blocks another pro-worker Biden initiative, this one involving noncompete clauses
Noncompete clauses in employment contracts are sterling examples of the give-them-an-inch-and-they’ll-take-a-mile principle in business behavior.
Once applied chiefly to executives, engineers and others with access to a company’s trade secrets, they have expanded to cover almost anybody — low-wage security guards, rank-and-file factory workers and even fast-food counter workers.
A recent academic survey estimated that nearly 1 in 5 American workers, or about 30 million people, are subject to noncompetes.
Noncompetes have long faced significant legal hostility because of their often blunt prohibition on employee mobility.
— Starr, Prescott and Bishara (2020)
Although the provisions are often described as noncompete “agreements,” the survey found that the vast majority of workers haven’t negotiated any such agreement with their employers, and about one-third are presented with the restriction after they’ve already accepted a job offer.
A couple of other points: Noncompetes tend to suppress wages. They also undermine innovation.
For these and other reasons, the Biden administration took aim at noncompete clauses in 2021, instructing the Federal Trade Commission to “curtail” those that “may unfairly limit worker mobility.”
After more than a year of study, the FTC followed through with a proposed rule, issued April 23 and scheduled to take effect Sept. 4, that banned new noncompetes and forbade the enforcement of existing clauses except for senior executives who were already subject to the restrictions.
You probably know what happened next: Big Business, in the guise of the U.S. Chamber of Commerce, sued to block the FTC’s rule. The lawsuit was filed not in Washington, D.C., where the agency resides, but in Texas, where it was almost certain to come before a conservative judge appointed by a Republican.
Sure enough, it came before Federal Judge Ada Brown of Dallas, a Trump appointee, who on July 3 blocked the FTC from implementing or enforcing its rule until further notice.
Brown says she will rule by Aug. 30, less than a week before the rule is set to take effect, on whether her decision will give relief only to the plaintiffs in the case — a Dallas tax firm founded by a former tax advisor to then-President Trump, the Chamber of Commerce, and other business associations — or apply nationwide.
Here’s the background.
As the academic economists observed in their survey, published in 2020, “noncompetes have long faced significant legal hostility because of their often blunt prohibition on employee mobility.” But they’ve been tolerated as long as they applied only to high-profile executives or professionals who might have access to proprietary information or clients.
Only three states outlaw noncompete clauses: California (where they were rendered unenforceable by law in 1872), Oklahoma and North Dakota. The New York Legislature voted to outlaw them last year, but Gov. Kathy Hochul vetoed the bill, bowing to pressure from Wall Street and business lobbyists.
The chamber’s lawsuit is chock full of risible misrepresentations. “For hundreds of years,” it says, “employers and workers have had the freedom to negotiate mutually beneficial non-compete agreements.” Among their virtues, the chamber asserts, is that they “incentivize investment in research and development … and facilitate the sorts of collaborative work environments needed for firms to innovate.”
The truth is just the opposite. Leaving aside the flagrant lie that noncompete clauses are the product of employer-employee “agreements,” evidence for the drawbacks of noncompete clauses — and for the value of eliminating them — is indisputable. One need not look further than the explosion of innovation in Silicon Valley, which was built by talented scientists and engineers who had the freedom to move from firm to firm, or start their own without interference from their employers.
Among the 400 engineers attending a 1969 conference in Silicon Valley (which had not yet been christened with that name), all but a couple of dozen had worked at one time or another for a single firm, Fairchild Semiconductor — which had been founded by eight former workers at Shockley Semiconductor Laboratory, some of whom would go on to found Intel Corp.
Nothing obstructed their movement — or the extraordinary level of innovation that made the valley what it remains today, the world’s leading center for technological research and development.
The economists — Evan Starr of the University of Maryland and J.J. Prescott and Norman Bishara of the University of Michigan — found that noncompete clauses keep wages low by blocking competition for workers among competing businesses. Some employers, they wrote, impose noncompete rules even when they’re legally unenforceable, in hopes that the mere threat of liability for breaching an employment contract will keep workers in place.
Big Business doesn’t have much of a case in favor of noncompete clauses. They’re the antithesis of the principles supposedly honored by “right to work” antiunion laws so beloved by employers and conservative politicians. They do, however, have a well-marked capacity to suppress wages and lock workers in lousy jobs.
There can be no question that the imposition of noncompete clauses has reached an absurd level.
The fast-food chain Jimmy John’s, for example, prohibited its employees from working at any other business that sells “submarine, hero-type, deli-style, pita, and/or wrapped or rolled sandwiches” within up to three miles from any Jimmy John’s store and for two years after leaving the company, according to a lawsuit filed in 2016 by Illinois Atty. Gen. Lisa Madigan. The franchisor agreed to drop the clause to settle Madigan’s lawsuit and a second lawsuit filed by New York state.
Last year, the FTC sued two affiliated Michigan security firms, Prudential Security and Prudential Command, for requiring low-wage security guards to sign contracts prohibiting them from working for any competitor within 100 miles of their jobs for two years of leaving Prudential. The firms threatened the guards with $100,000 in penalties for violating the clause.
The agency also sued two glass container firms, O-I Glass of Ohio and Luxemburg-based Ardagh Group, over noncompete clauses imposed on a combined 1,700 furnace workers and other employees. Those clauses stifled innovation and competition in the glass industry, the FTC said, because it prevented rivals from finding skilled and experienced workers in an already highly concentrated industry.
Prudential’s owners and the glass companies all agreed to bans on imposing or enforcing their noncompete clauses on present or future employees.
In its current lawsuit in Texas, the Chamber of Commerce asserts that the FTC’s proposed ban on noncompete clauses exceeds the authority it was granted by Congress.
Its point, which was accepted in full by Brown, is that the agency is authorized only to make rules dealing with “unfair or deceptive acts or practices,” not “unfair methods of competition.” (The FTC responds that the “clear language” of the 1914 FTC Act gives it full authority to “prevent unfair methods of competition through … rulemaking.”)
There’s more to the chamber’s lawsuit, however. It’s part of a concerted effort by the business community to undermine FTC Chair Lina Khan, who has worked hard to turn the agency into the vigorous protector of consumer rights that Congress envisioned in 1914, but which a succession of leaders allowed to fade into near-uselessness.
Taking a cue from attacks by Elon Musk and Trader Joe’s on the National Labor Relations Board, the chamber contends that the FTC itself is unconstitutional, because its commissioners can’t be removed by the president at will — they serve for seven years and can be removed only for “inefficiency, neglect of duty, or malfeasance in office.”
(Franklin Roosevelt learned this the hard way, when the Supreme Court overturned his firing of a Republican FTC commissioner in 1935; FDR’s irritation at that decision contributed to his decision to pursue a court-packing scheme, which failed.)
The federal courts generally haven’t looked kindly on these collateral attacks on federal agencies, however.
In filing its lawsuit, the chamber followed Big Business’ familiar and cynical practice of “forum-shopping,” or hunting for a federal court predestined to see things its way and willing to issue nationwide injunctions blocking Biden initiatives. For this case, it settled on federal court in Dallas, where only one of the eight sitting judges was appointed by a Democrat (Bill Clinton). Of the remaining seven, three are Trump appointees, including Brown.
Forum-shopping, especially among federal courts in Texas, has become such an embarrassment to the federal judiciary that the Judicial Conference of the United States, which sets policy for the federal courts, issued a statement in March calling on the district courts to find fairer ways to assign cases so they don’t all go to GOP-appointed judges.
David Godbey, the chief judge of the Northern District of Texas, where the chamber’s case landed, has refused to do so. Godbey is an appointee of George W. Bush. In any event, the likelihood that random assignment of the chamber’s lawsuit would be heard by a Republican appointee was obviously strong. Any appeal from Brown’s ruling would come before the U.S. 5th Circuit Court of Appeals, the dumbest and most reactionary appellate court in the land.
It’s likely that this issue will land before the Supreme Court. A second case challenging the FTC rule brought by a Philadelphia-area tree-trimming service backed by a right-wing legal foundation is being heard by a Biden-appointed judge, Kelley Brisbon Hodge, who says she will issue a preliminary ruling by July 23. If she backs the FTC and is upheld by the U.S. 3rd Circuit Court of Appeals, the Supreme Court may have to take the case to resolve any conflict. That means the FTC rule is likely to remain in limbo well into next year, or even beyond.
Welcome to the age of AI hacking, in which the right prompts make amateurs into master hackers.
A group of cybercriminals recently used off-the-shelf artificial intelligence chatbots to steal data on nearly 200 million taxpayers. The bots provided the code and ready-to-execute plans to bypass firewalls.
Although they were explicitly programmed to refuse to help hackers, the bots were duped into abetting the cybercrime.
According to a recent report from Israeli cybersecurity firm Gambit Security, hackers last month used Claude, the chatbot from Anthropic, to steal 150 gigabytes of data from Mexican government agencies.
Claude initially refused to cooperate with the hacking attempts and even denied requests to cover the hackers’ digital tracks, the experts who discovered the breach said. The group pummelled the bot with more than 1,000 prompts to bypass the safeguards and convince Claude they were allowed to test the system for vulnerabilities.
AI companies have been trying to create unbreakable chains on their AI models to restrain them from helping do things such as generating child sexual content or aiding in sourcing and creating weapons. They hire entire teams to try to break their own chatbots before someone else does.
But in this case, hackers continuously prompted Claude in creative ways and were able to “jailbreak” the chatbot to assist them. When they encountered problems with Claude, the hackers used OpenAI’s ChatGPT for data analysis and to learn which credentials were required to move through the system undetected.
The group used AI to find and exploit vulnerabilities, bypass defences, create backdoors and analyze data along the way to gain control of the systems before they stole 195 million identities from nine Mexican government systems, including tax records, vehicle registration as well as birth and property details.
AI “doesn’t sleep,” Curtis Simpson, chief executive of Gambit Security, said in a blog post. “It collapses the cost of sophistication to near zero.”
“No amount of prevention investment would have made this attack impossible,” he said.
Anthropic did not respond to a request for comment. It told Bloomberg that it had banned the accounts involved and disrupted their activity after an investigation.
OpenAI said it is aware of the attack campaign carried out using Anthropic’s models against the Mexican government agencies.
“We also identified other attempts by the adversary to use our models for activities that violate our usage policies; our models refused to comply with these attempts,” an OpenAI spokesperson said in a statement. “We have banned the accounts used by this adversary and value the outreach from Gambit Security.”
Instances of generative AI-assisted hacking are on the rise, and the threat of cyberattacks from bots acting on their own is no longer science fiction. With AI doing their bidding, novices can cause damage in moments, while experienced hackers can launch many more sophisticated attacks with much less effort.
Earlier this year, Amazon discovered that a low-skilled hacker used commercially available AI to breach 600 firewalls. Another took control of thousands of DJI robot vacuums with help from Claude, and was able to access live video feed, audio and floor plans of strangers.
“The kinds of things we’re seeing today are only the early signs of the kinds of things that AIs will be able to do in a few years,” said Nikola Jurkovic, an expert working on reducing risks from advanced AI. “So we need to urgently prepare.”
Late last year, Anthropic warned that society has reached an “inflection point” in AI use in cybersecurity after disrupting what the company said was a Chinese state-sponsored espionage campaign that used Claude to infiltrate 30 global targets, including financial institutions and government agencies.
Generative AI also has been used to extort companies, create realistic online profiles by North Korean operatives to secure jobs in U.S. Fortune 500 companies, run romance scams and operate a network of Russian propaganda accounts.
Over the last few years, AI models have gone from being able to manage tasks lasting only a few seconds to today’s AI agents working autonomously for many hours. AI’s capability to complete long tasks is doubling every seven months.
“We just don’t actually know what is the upper limit of AI’s capability, because no one’s made benchmarks that are difficult enough so the AI can’t do them,” said Jurkovic, who works at METR, a nonprofit that measures AI system capabilities to cause catastrophic harm to society.
So far, the most common use of AI for hacking has been social engineering. Large language models are used to write convincing emails to dupe people out of their money, causing an eight-fold increase in complaints from older Americans as they lost $4.9 billion in online fraud in 2025.
“The messages used to elicit a click from the target can now be generated on a per-user basis more efficiently and with fewer tell-tale signs of phishing,” such as grammatical and spelling errors, said Cliff Neuman, an associate professor of computer science at USC.
AI companies have been responding using AI to detect attacks, audit code and patch vulnerabilities.
“Ultimately, the big imbalance stems from the need of the good-actors to be secure all the time, and of the bad-actors to be right only once,” Neuman said.
The stakes around AI are rising as it infiltrates every aspect of the economy. Many are concerned that there is insufficient understanding of how to ensure it cannot be misused by bad actors or nudged to go rogue.
Even those at the top of the industry have warned users about the potential misuse of AI.
Dario Amodei, the CEO of Anthropic, has long advocated that the AI systems being built are unpredictable and difficult to control. These AIs have shown behaviors as varied as deception and blackmail, to scheming and cheating by hacking software.
Still, major AI companies — OpenAI, Anthropic, xAI, and Google — signed contracts with the U.S. government to use their AIs in military operations.
This last week, the Pentagon directed federal agencies to phase out Claude after the company refused to back down on its demand that it wouldn’t allow its AI to be used for mass domestic surveillance and fully autonomous weapons.
“The AI systems of today are nowhere near reliable enough to make fully autonomous weapons,” Amodei told CBS News.
The iPic dine-in movie theater chain has filed for Chapter 11 bankruptcy protection and intends to pursue a sale of its assets, citing the difficult post-pandemic theatrical market.
The Boca Raton, Fla.-based company has 13 locations across the U.S., including in Pasadena and Westwood, according to a Feb. 25 filing in U.S. Bankruptcy Court in the Southern District of Florida, West Palm Beach division.
As part of the bankruptcy process, the Pasadena and Westwood theaters will be permanently closed, according to WARN Act notices filed with the state of California’s Employment Development Department.
The company came to its conclusion after “exploring a range of possible alternatives,” iPic Chief Executive Patrick Quinn said in a statement.
“We are committed to continuing our business operations with minimal impact throughout the process and will endeavor to serve our customers with the high standard of care they have come to expect from us,” he said.
The company will keep its current management to maintain day-to-day operations while it goes through the bankruptcy process, iPic said in the statement. The last day of employment for workers in its Pasadena and Westwood locations is April 28, according to a state WARN Act notice. The chain has 1,300 full- and part-time employees, with 193 workers in California.
The theatrical business, including the exhibition industry, still has not recovered from the pandemic’s effect on consumer behavior. Last year, overall box office revenue in the U.S. and Canada totaled about $8.8 billion, up just 1.6% compared with 2024. Even more troubling is that industry revenue in 2025 was down 22.1% compared with pre-pandemic 2019’s totals.
IPic noted those trends in its bankruptcy filing, describing the changes in consumer behavior as “lasting” and blaming the rise of streaming for “fundamentally” altering the movie theater business.
“These industry shifts have directly reduced box office revenues and related ancillary revenues, including food and beverage sales,” the company stated in its bankruptcy filing.
IPic also attributed its decision to rising rents and labor costs.
The company estimated it owed about $141,000 in taxes and about $2.7 million in total unsecured claims. The company’s assets were valued at about $155.3 million, the majority of which coming from theater equipment and furniture. Its liabilities totaled $113.9 million.
The chain had previously filed for bankruptcy protection in 2019.
In an expansion of its business of processing pharmaceuticals in Earth’s orbit, Varda Space Industries is renting a large El Segundo plant where toy manufacturer Mattel used to design Hot Wheels and Barbie dolls.
The plant in El Segundo’s aerospace corridor will be an extension of Varda Space Industries’ headquarters in a much smaller building on nearby Aviation Boulevard.
Varda will occupy a 205,443-square-foot industrial and office campus at 2031 E. Mariposa Ave., which will give it additional capacity to manufacture spacecraft at scale, the company said.
Originally built in the 1940s as an aircraft facility, the complex has a history as part of aerospace and defense industries that have long shaped the South Bay and is near a host of major defense and space contractors. It is also close to Los Angeles Air Force Base, headquarters to the Space Systems Command.
Workers test AstroForge’s Odin asteroid probe, which was lost in space after launch this year.
(Varda Space Industries)
Varda is one of a new generation of aerospace startups that have flourished in Southern California and the South Bay over the last several years, particularly in El Segundo, often with ties to SpaceX.
Elon Musk’s company, founded in 2002 in El Segundo, has revolutionized the industry with reusable rockets that have radically lowered the cost of lifting payloads into space. Though it has moved its headquarters to Texas, SpaceX retains large-scale operations in Hawthorne.
Varda co-founder and Chief Executive Will Bruey is a former SpaceX avionics engineer, and the company’s spacecraft are launched on SpaceX’s workhorse Falcon 9 rockets from Vandenberg Space Force Base in Santa Barbara County.
Varda makes automated labs that look like cylindrical desktop speakers, which it sends into orbit in capsules and satellite platforms it also builds. There, in microgravity, the miniature labs grow molecular crystals that are purer than those produced in Earth’s gravity for use in pharmaceuticals.
It has contracts with drug companies and also the military, which tests technology at hypersonic speeds as the capsules return to Earth.
Its fifth capsule was launched in November and returned to Earth in late January; its next mission is set in the coming weeks. Varda has more than 10 missions scheduled on Falcon 9s through 2028.
For the last several decades, the Mariposa Avenue property served as the research and development center for Mattel Toys. El Segundo has also long been a center for the toy industry as companies like to set up shop in the shadow of Mattel.
The Mattel facility “has always been an exceptional property with a legacy tied to aerospace innovation, and leasing to Varda Space Industries feels like a natural continuation of that story,” said Michael Woods, a partner at GPI Cos., which owns the property.
“We are proud to support a company that is genuinely pushing the boundaries of what’s possible, and are excited to watch Varda grow and thrive here in El Segundo,” Woods said.
As one of the country’s most active hubs of aerospace and defense innovation, El Segundo has seen its industrial property vacancy fall to 3.4% on demand from space companies, government contractors and technology startups, real estate brokerage CBRE said.
Successful startups often have to leave the neighborhood when they want to expand, real estate broker Bob Haley of CBRE said. The 9-acre Mattel facility was big enough to keep Varda in the city.
Last year, Varda subleased about 55,000 square feet of lab space from alternative protein company Beyond Meat at 888 Douglas St. in El Segundo, which it started moving into in June.
Varda will get the keys to its new building in December and spend four to eight months building production and assembly facilities as it ramps up operations. By the end of next year, it expects to have constructed 10 more spacecraft.
In the future, Varda could consolidate offices there, given its size. Currently, though, the plan is to retain all properties, creating a campus of three buildings within a mile of one another that are served by the company’s transportation services, Chief Operating Officer Jonathan Barr said.
“We already have Varda-branded shuttles running up and down Aviation Boulevard,” he said.
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