FTC ban on non-competes would put employees in the driver’s seat
There are other legal instruments in the US — such as non-disclosure agreements — that can protect companies from the theft of intellectual property without limiting employee careers and artificially depressing salaries.
There are other legal instruments in the US — such as non-disclosure agreements — that can protect companies from the theft of intellectual property without limiting employee careers and artificially depressing salaries. So, it’s not as if companies are without recourse.
Opposing the ban
At least three lawsuits have been filed against the proposed ban. The most significant was brought by the US Chamber of Commerce, the Business Roundtable, and other business interests. They filed a lawsuit seeking a court order to vacate the FTC action. (The lawsuit was filed one day after the FTC issued the new rule.) The FTC faces challenges about whether it has the power to unilaterally invoke the decision to ban non-compete clauses. Here’s more detail on the opposing viewpoint.
Many of the largest US corporations are represented in the lawsuit by the Business Roundtable, which is an association of more than 200 CEOs of leading US companies from every sector of the economy. Business Roundtable members include many tech companies, such as Alphabet (Google), Amazon, AMD, Apple, Cisco, Dell, Hewlett-Packard Enterprise, HP, IBM, Intel, Microsoft, Palo Alto Networks, Qualcomm, Salesforce, and SAP.
The judge in the lawsuit brought by the US Chamber of Commerce could grant a temporary injunction to delay the FTC ban pending the trial’s outcome. Plus, the case could be hung up in appeals for years to come, with the possibility that it would play out in the Supreme Court. So, over the short haul, nothing may change. But companies and employees should be thinking about how the ban might affect them.
In 2023, research firm Gartner polled HR leaders about the then-proposed ban: 72% said their organization would likely benefit from the ban, increasing the availability of talent by giving them access to a larger pool of skilled workers. Gartner recently polled attendees of a Benchmark with Gartner live webinar about the new FTC rule; 60% strongly or somewhat agreed that their organizations would benefit from better access to talent. But the ban creates a double-edged sword for employers: 51% also either strongly or somewhat agreed that their organizations would be at risk of losing top talent.
Companies that use non-competes should get their lawyers working on alternatives right away, regardless of the legal fight over the FTC rule. For one thing, there can be no doubt that the generally positive reception to banning non-compete agreements will have an effect on prospective employees. (The Philadelphia Inquirer offers useful advice for companies on actions they should take now.)
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