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In a recent announcement, the Federal Trade Commission (FTC) unveiled a significant shift in its approach to non-compete agreements, sparking varied reactions across different sectors. In their efforts to safeguard consumers and promote fair competition through the enforcement of antitrust laws, did they overstep?

Here is what talent acquisition and hiring leaders need to know:

• Employers will have to cancel any pre-existing agreements
• Companies can still have employees or new hires sign a non-disclosure agreement (NDA) if protective measures against your company’s proprietary information and strategy is required
• 2 out of 5 Americans say they would look for a new job if this is passed (Ipsos)
• The ruling will not go into effect for at least another 120 days
• An estimated 30 million workers are subject to non-competes
• This impacts workers who earn more than $151,164 annually and not the senior-level executives. (Fewer than 1% of workers are estimated to be senior executives, according to SIA)

The  FTC anticipates higher wages, more start-ups, and more innovation as outcomes if the final rule is approved:

• 2.7% annual growth spurred in new business formation, resulting in the creation of over 8,500 additional businesses annually
• $524 per year increase to boost workers’ earnings
• $194 billion reduced healthcare costs over the next decade
• 17,000 to 29,000 new patents annually over the next decade, a catalyst for innovation

What does the government say? 

From the perspective of Congress, the FTC’s move signifies a pivotal step towards fostering fair competition and safeguarding workers’ rights. Some lawmakers view non-compete agreements as restrictive measures that hinder labor mobility and stifle innovation. By advocating for stricter regulations or even a complete ban on these agreements, Congress aims to create a more equitable playing field for employees and promote a culture of entrepreneurship.

But, some leaders wonder: is it really promoting a culture of entrepreneurship if anyone can leave to a competitor with a company’s intellectual property?

What does the US Chamber of Commerce think? 

“Blatantly unlawful.” The US Chamber is in denial that this action will not stand, said Sean Heather, senior VP for international regulatory affairs and antitrust at the US Chamber of Commerce. (SIA) Smells like a lawsuit waiting to happen.

What does HR say? 

However, the Society for Human Resource Management (SHRM) also expresses reservations about the FTC’s stance. Emily M. Dickens, chief of staff and head of government affairs for SHRM, highlighted concerns regarding the potential repercussions of a blanket ban on non-compete agreements. SHRM believes that such a sweeping measure could disrupt the delicate balance between protecting employers’ legitimate business interests and employees’ freedom to pursue career opportunities. Instead, SHRM advocates for a nuanced approach that addresses the specific circumstances and needs of both employers and employees.

What are the business leaders thinking? 

On the other hand, business leaders offer a mixed response to the FTC’s announcement. While some view the proposed restrictions on non-compete agreements as a welcome change that promotes workforce mobility and fosters a more dynamic labor market, others express apprehension about the potential impact on businesses’ ability to safeguard their intellectual property and confidential information. For many companies, non-compete agreements serve as crucial tools for protecting proprietary knowledge and maintaining a competitive edge in their respective industries.

What if I work in a recruiting or staffing organization? 

Brace yourselves for change. Recruiting firms typically rely on non-compete agreements to protect their investments in cultivating client relationships and identifying top talent. These agreements may prevent recruited candidates from immediately joining competitors or working directly with clients they were introduced to by the recruiting firm. By limiting the ability of candidates to jump ship or directly compete with the firm, non-compete agreements serve as a form of protection for the recruiting firm’s business interests. Time to get creative. 

What happens next? 

As the debate over non-compete agreements continues to unfold, it remains essential for policymakers, industry stakeholders, and advocacy groups to engage in constructive dialogue to strike a balance between promoting fair competition and addressing legitimate business concerns. Finding common ground on this complex issue will be crucial in shaping the future of employment practices and fostering a thriving economic landscape for all stakeholders involved.

Tell us what you think! What changes are you making in your job offers? What challenges do you anticipate for recruiting and hiring? Or, does this open up a new candidate pool? We want to hear from you, please email katie@recruitmentmarketing.com 

Katie Fortunato

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President, RecruitmentMarketing.com Katie Fortunato is a passionate, purpose driven entrepreneur and executive. She is the President and co-founding employee of RecruitmentMarketing.com, a leading B2B marketplace for talent acquisition professionals. She oversees the company's growth efforts, strategic direction, content production and operations, and is dedicated to building a world class community to help navigate and improve the ever-evolving recruitment marketing landscape. She has held various roles across talent acquisition, media and entertainment. Her career began in recruiting where she was a hiring manager for a national workforce solutions provider, then worked at AOL and later as the Director of Partnerships at Dow Jones & Co, specifically for The Wall Street Journal, where she launched new lines of business. Katie also moonlights producing new works by emerging theater artists. She supports initiatives helping people move their lives “onward and upward” as the President of the Onward & Upward Foundation.