Why Employees And Employers Alike Should Celebrate The End of Non-Competes
Source: Reworked, Lance Haun
Photo: Non-complete Agreement (Icertis)
The FTC’s decision to ban non-compete agreements rattled businesses, but both employers and employees have a lot to gain from it.
The Federal Trade Commission (FTC) just dealt a decisive blow to non-compete agreements, declaring them largely illegal. As you can imagine, some employers are alarmed, claiming it will jeopardize investment and innovation.
The battle over non-compete clauses isn’t new. It’s centuries old. From the restrictive practices of medieval guilds to the ironclad agreements demanded by modern corporations, businesses have long tried to dictate where their workers can and cannot go — often in the name of protecting their interests.
Only about 20% of the U.S. workforce today is covered by a non-compete agreement — often for upper-level positions, but not always.
In a world where your most talented employees are no longer legally bound to stay, companies will have to shift their focus. Perhaps instead of relying on restrictive contracts, the key to retaining top performers will be investing in a positive workplace culture, competitive benefits and genuine opportunities for growth.
Could the non-compete shakeup inadvertently force businesses to create workplaces that employees actually want to work in, ultimately leading to a healthier and more dynamic economy?
Why Businesses Should Not-So-Secretly Love the Ban
Non-competes aimed at keeping talent are built on a flawed premise: the assumption that an employee’s only options are to stay put or face legal consequences. This ignores the reality: talented, motivated individuals will find a way to pursue better opportunities, regardless of contracts. Frustrated employees restricted by non-competes often disengage on the job, underperforming and creating a toxic ripple effect within teams.
If businesses want to attract and retain top talent, they’ll need to offer more than threats of legal action.
A non-compete ban encourages companies to invest in the ingredients of a truly attractive workplace: fair compensation, generous benefits, a genuine commitment to employee experience, engaging leadership and clear paths for career growth. These shifts will improve a company’s bottom line and give it an opportunity to compete for talent that might’ve been previously covered in a non-compete.
Modern workplaces thrive on adaptability, and that extends to managing the natural movement of talent. Overreliance on non-competes breeds complacency in a rapidly changing workplace.
Instead, the ban should motivate companies to become proactive about succession planning, robust knowledge transfer systems and cross-training initiatives. These measures not only ease transitions when employees leave, they also foster a more resilient and collaborative workforce in the long term.
Employees Win, Too
We can’t forget the impact of the ban on employees. After a few years of labor wins for employees, this one might be the most important one for the white-collar workforce.
The most immediate upside of the non-compete ban is the shift in power dynamics. Workers, especially those who should’ve never been covered by a non-compete in the first place, are no longer held hostage by restrictive clauses. Instead, they have the freedom to negotiate better salaries, pursue promotions at rival businesses and explore untapped potential within their field.
But this newfound leverage benefits employees across the board, even those who choose to stay with their current companies.
Non-competes often mask problems like toxic work cultures, unfair compensation or lack of opportunities. Without those agreements, companies will have to compete on their merits to attract and retain top talent, driving a natural evolution toward better, more employee-focused workplaces. When talent is free to move, the businesses that provide a fulfilling work environment will emerge as the winners.
Assuming the ban is held up, it could also spark a wave of new businesses, injecting innovation and dynamism into the economy. In its announcement, the FTC focused on inspiring innovation and entrepreneurship, citing that it could generate over 8,500 businesses a year by freeing employees from being artificially locked out of using their expertise and experience to start their own ventures. This benefits everyone, as increased competition encourages established companies to stay on their toes.
Weren’t Non-Competes Necessary?
I get it: Businesses are going to worry about employees leaving and spilling crucial intellectual property. However, non-competes are a blunt instrument compared to the many legal protections that should already be in place, such as non-disclosure agreements, patents and trade secret laws.
Companies will need to rely on those tools more instead of sweeping employment bans. Organizations already do this in states with rules heavily regulating (or outright banning) non-competes. States across the political spectrum, like California, North Dakota and Oklahoma, all manage to attract business and keep innovating with the most restrictive non-compete bans in the country today.
Some also argue that companies won’t invest in employee development if they don’t have guarantees that workers will stick around for a certain period. Yet, the idea that training only benefits the company if the employee stays indefinitely just doesn’t fly. Businesses that train their people gain an advantage regardless, building a more skilled, knowledgeable workforce that is an asset in itself (and a retention advantage in and of itself).
Undeniably, a non-compete ban will cause some companies to scramble. The transition period may be uncomfortable, as businesses adapt and employees begin flexing their newfound mobility. However, this temporary upheaval can’t overshadow the potential long-term benefits.
A Brighter Future for All
Change can be unsettling. And this particular change will undoubtedly challenge the status quo. Some businesses might initially struggle to adapt, clinging to outdated notions of control through restrictive contracts. However, the companies that embrace the new dynamics — focusing on cultivating genuine reasons for employees to stay — will be the ones that continue to thrive.
A workplace without artificial barriers to mobility better rewards employers who genuinely invest in their people and fosters a healthier, more competitive economy overall. The FTC’s move may be controversial now, but in the long run, it might be remembered as the catalyst for better businesses and brighter futures for the workforce.
About the Author
Lance Haun is a leadership and technology columnist for Reworked. He has spent nearly 20 years researching and writing about HR, work and technology. Connect with Lance Haun: fa-brands fa-x-twitter fa-brands fa-linkedin