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.
Robotaxis could be turning into robocops.
A self-driving Waymo reported two teens to San Mateo, Calif., police on Monday after they were found drinking alcohol and shooting toy guns in the back of the vehicle.
According to a social media post from the San Mateo Police Department, officers detained two 15-year-olds after the Waymo they were riding in contacted the department and stopped in a parking lot until law enforcement arrived.
“Parents do you know where your teens are?” the San Mateo Police Department wrote on Facebook following the incident. “Waymo does!”
Officers removed both teens from the vehicle and determined they were using toy guns to shoot Orbeez out the windows. Orbeez are small, water-absorbing beads sold at toy stores.
“Toy guns, water guns, and BB guns all pose real dangers, especially to an untrained eye,” the Police Department said. “The simple handling of them can cause fear in [passersby].” “
A video posted on Facebook shows at least five officers and a police dog responding to the scene and approaching the Waymo with their weapons raised.
Waymo did not immediately respond to a request for comment.
Waymo vehicles have internal cameras and microphones that may be used in an emergency or to “promote safety and security,” according to Waymo’s online support page.
The cameras are also used to ensure the vehicles are clean and to help find lost items, according to the support page.
The company said it does not use facial recognition or other biometric identification technologies to identify individuals.
“In more urgent circumstances, support may access live video during a trip,” the Waymo page said.
The San Mateo Police Department’s Facebook post has garnered nearly 60 comments, with one user accusing Waymo of “snitching.”
“At least they got a designated driver?!” one user commented.
Business
Commentary: How right-wing anti-transgender attacks led to a Supreme Court ruling upholding sex discrimination
At the Supreme Court, the unfounded fear of boys masquerading as girls in youth sports rolled the clock back on gender equality.
On the surface, the Supreme Court’s June 30 opinion upholding state laws barring transgender girls from women’s and girl’s sports teams looks like a victory for women’s rights.
The 6-3 opinion by Justice Brett M. Kavanaugh certainly presents itself that way. “Females and males have inherent physical differences relevant to athletic performance,” Kavanaugh wrote. “Therefore, in contact sports, forcing female athletes to compete against males can create significant safety risks.” He also asserted that “forcing female athletes to compete against males can undermine competitive fairness.”
The ruling applied to prohibitions enacted in Idaho and West Virginia against “biological” males’ participation on women’s teams in public schools. Federal judges in both states overturned the bans. The Supreme Court majority restored them. The ruling essentially upholds similar bans enacted in 25 other states.
There was no record of any transgender person participating in school sports in the State, let alone any ‘problem’ with transgender students … creating unfair competition or unsafe conditions.
— Justice Sonia Sotomayor, demolishing the Supreme Court’s argument in favor of banning transgender girls from girl’s sports
Kavanaugh, like Donald Trump and others in the anti-transgender camp, maintained that one’s gender is an immutable fact of life, established even before birth.
Anything else, Trump stated in an executive order he issued on inauguration day 2025, could only be the product of “gender ideology extremism.” The U.S., his order stated, recognizes “two sexes, male and female. These sexes are not changeable and are grounded in fundamental and incontrovertible reality.” That’s a “biological truth,” he declared.
In his own version of this overconfident and factually insupportable conclusion, Kavanaugh wrote: “As all agree, females and males have inherent physical differences relevant to athletic performance.”
Science recognizes that some people are “born with sex traits that don’t fit into typical male or female patterns,” to cite a discussion on the Cleveland Clinic web page on the topic “intersex.” The condition “may involve chromosomes, hormones, reproductive organs or genitals.”
From a psychological standpoint, medical science recognizes “gender dysphoria” as a real condition often requiring counseling and medical intervention such as the use of puberty blockers and hormones to stave off the development of secondary sex characteristics until the condition can be resolved.
No one disputes that there are physical differences between the sexes. Few would dispute that on average or even at the median, males may be bigger and more powerful than females, or that in certain contact sports the difference may be telling and on occasion dangerous.
But that’s not the same as asserting that the physical differences between males and females invariably mean that men will invariably prevail over women in all competitions or that their participation will endanger women.
The International Olympic Committee — in a policy statement Kavanaugh cited incompletely — says that in “most running and swimming events,” males have a 10% to 12% advantage over women. That’s a range that would accommodate the full spectrum of outcomes — transgender females win, cisfemales win, they tie. (The “cis” prefix denotes those living consistent with their birth gender.)
West Virginia and Idaho addressed this ambiguity by banning transgender women from all girls’ teams. So under their rules transgender girls can’t play football or soccer with cisgirls. But what’s the argument in favor of banning them from the 100-yard dash, or cross-country track, or diving, or archery?
But something else is going on here. The Supreme Court’s ruling was almost preordained, given the years-long campaign by conservatives to demonize transgender individuals as if they’re members of an alien species.
It will be recalled that during his presidential campaign, Trump spun a despicable fantasy in which children were kidnapped in school and secretly subjected to sex-change operations.
Trump’s executive order wiped out policies aimed at protecting transgender adults from discrimination. He moved to outlaw gender-affirming medical therapies for anyone under 19 by cutting off federal funding for healthcare institutions that provide such care.
He banned transgender individuals from serving in the military and ordered federal prison officials to move transgender inmates into the general populations consistent with their birth genders, which exposes them to physical assault. (Federal Judge Royce Lamberth of Washington, D.C., has blocked the government from transferring three transgender women into the male prison population or terminating their hormone treatments.)
I wrote during Trump’s first term, when his anti-transgender policies were still gestating, that the goal was to show that “one can target any community, as long as it doesn’t have a strong political voice or political power. These are the actions of bullies and cowards, pretending to be strong.”
Last year, the Supreme Court struck its first blow against transgender rights by upholding a Tennessee law banning transgender care, including puberty blockers and hormone therapy, for minors. Similar laws have been enacted in 25 other states. The majority in that ruling by Chief Justice John G. Roberts Jr. was identical to the one in the June 30 ruling — Roberts, Kavanaugh, and Justices Clarence Thomas, Samuel A. Alito Jr., Neil M. Gorsuch and Amy Coney Barrett.
Who are the targets of this ideological campaign? They number only about 1.6 million U.S. adults, or one-half of 1% of the U.S. population. About 300,000 adolescents ages 13 to 17, or 1.4%, identify as transgender, according to a study by UCLA School of Law.
In West Virginia, as Justice Sonia Sotomayor observed in her dissenting opinion, “there was no record of any transgender person participating in school sports in the State, let along any ‘problem’ with transgender students … creating unfair competition or unsafe conditions.”
In endorsing the flat bans directed at transgender women in Idaho and West Virginia, Kavanaugh argued that any attempt to implement case-by-case judgments of students’ requests to join sports teams inconsistent with their biological gender would create “an enormous practical and administrability problem.”
Is that so? That wasn’t the case in Maine, where the annual K-12 population is more than 170,000. There, a committee was charged with determining whether a student’s participation in a sport consistent with their gender identity but inconsistent with their biological sex would “result in an unfair athletic advantage” or present a risk of injury to others. The committee held 56 hearings from 2013 through 2021, or an average of seven per year. During the entire time span, only four involved transgender girls. (The outcome of those hearings couldn’t be learned.)
It was Maine’s policy, one might recall, that provoked a confrontation between Trump and Maine Gov. Janet Mills at the White House last year, when Trump threatened to withhold federal funding from the state unless it barred transgender students from competing on women’s sports teams. “We’ll see you in court,” Mills snapped.
Whether the Idaho and West Virginia laws genuinely protect girls from unfair competition is questionable. (The Idaho law is styled the “Fairness in Women’s Sports Act.”) In practice, the laws may subject women in public schools to “invasive sex verification procedures,” as educational expert George Theoharis of Syracuse University wrote after the court ruling.
They’re also based on a retrograde view of women as fragile creatures needing men’s protection, Theoharis wrote — “the same logic that has historically been used to justify excluding women from making their own healthcare decisions and girls from rigorous math and science; that physically demanding work is simply beyond them.” (There don’t appear to be any state laws barring transgender women from competing in men’s sports.)
Becky Pepper-Jackson, the plaintiff in the West Virginia case, in which she is identified only as B.P.J., is the only transgender girl who sought to join girl’s teams — track and cross-country — in the state. That was in 2021, just after West Virginia passed its law and she was about to enter sixth grade. She didn’t appear to pose any competitive risk to others on the track and cross-country teams she applied to join — her lawyers told the Supreme Court that on those no-cut teams, she “came in near the back.”
Anyway, she had not gone through male puberty, which theoretically might have endowed her with a competitive advantage, because she had been taking puberty blockers and female hormones.
Thanks to the court’s ruling, Sotomayor observed in a dissent joined by Justices Elena Kagan and Ketanji Brown Jackson, West Virginia can deny Becky access to school sports “because it thinks they have an inherent athletic advantage, even if the facts show that they do not.”
B.P.J., Sotomayor wrote, “cannot practice on girls’ teams, even if she would not take anyone’s spot in an eventual competition, even if everyone who tries out for the team makes it, and even if having the chance to participate could aid immensely in treating B. P. J.’s gender dysphoria.”
So whose interest was really protected by the Supreme Court?
An Orange County real estate investor accused of criminally defrauding an Arizona bank of nearly $100 million pleaded not guilty Monday and remains in custody.
Mahender Makhijani, 44, of Corona del Mar — who also was ordered by an arbitrator to pay $1.34 billion in a separate civil fraud case — was arraigned in Santa Ana federal court on two charges.
He is accused of bank fraud and making a false statement to a bank in a June 8 case involving a $100 million real estate loan made by Phoenix-based Western Alliance Bank. He was taken into custody on June 10.
Makhijani is accused of providing bogus collateral for the October 2024 loan now in default. In a civil lawsuit, Western Alliance said the outstanding balance as nearly $99 million.
Prosecutors say he falsified title insurance policies that showed the bank would have a first lien on the underlying collateral if the loan went bad, when in fact it did not.
A trial was set for August 11 before U.S. District Judge David O. Carter in Santa Ana.
Michael Schachter, his criminal defense attorney, did not respond to messages seeking comment.
In the civil case, an arbitrator in May ordered Makhijani to pay Laguna Beach real estate mogul Mohammad Honarkar $1.34 billion after ruling he had fraudulently induced him into a 2021 joint venture — and then wrested control and lost to creditors more than two dozen properties Honarkar had owned.
Makhijani has not been criminally charged in that case, but prosecutors alleged in an affidavit in support of the bank fraud charges that he used “force and threats” in his dealings with Honarkar and others — including taking over the landmark Hotel Laguna in 2023 that Honarkar was renovating.
Prosecutors sought to hold Makhijani without bail after his arrest.
The affidavit noted he is a legal Indian immigrant with a home and bank accounts in that country, has access to private jets and threatened to “run away” if caught in a difficult situation.
The request was denied and he was granted $500,000 bail.
However, Makhijani remains in custody after a hearing sought by prosecutors last month before Magistrate Judge Autumn Spaeth.
The judge declined to accept a $450,000 cashier’s check submitted by a Makhijani associate for the bail, finding insufficient proof the source of the funds was legitimate, according to court records.
Makhijani is not prominent outside Orange County real estate circles, but he established a thriving distressed-assets business over the last decade that attracted prominent Southern California real estate investors.
Prosecutors said it paid for a lifestyle that included two multimillion-dollar homes in Corona del Mar, a luxury apartment in Newport Beach and various luxury vehicles.
As of last month, prosecutors had not fully traced his assets, which they believe are not held in his name and some of which may be in India.
The businessman employed an array of shell companies and strawmen to sign documents on his behalf, and to stand in for him as operators of his companies, according to the affidavit.
Makhijani told an associate he took extra precautions because wanted to insulate himself from litigation and that “they were sharks in the distressed world who took advantage of people,” the affidavit stated.
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