The Impacts of Non-compete Agreement Changes: Increasing Opportunity & Competition or Enabling Risks?

Have a non-compete? Maybe not much longer if you fall in some classifications

Let’s talk about the US FTC’s long-awaited move and what it really means for you as a professional, or as a business leader. We talked about economics last week, so labor laws and policies in the market is a great place to continue the economics theme. I’ll preface this with the likelihood that all of this gets challenged in the courts for sometime, so the implementation is going to be delayed. Although, action is required if you have some common gaps in your organizational armor for talent, IP (intellectual property), and client retention.

If you haven’t already taken action on this, organizations should consider reacting with the time remaining to mitigate risks and fallout. A few considerations include reviewing client and information retention process, along with preparing organizational talent strategy for the realities of the times, trends, and tactics. When talent walks out, it’s critical to make sure that’s all that leaves with their experience, versus losing tremendous organizational value due to loss of clients, business intelligence, and other valuable aspects retained with an off-boarding team member.

This move to scrap non-competes is the next iteration of a shift in the workplace and labor market that was inevitable, and the timing is interesting with the AI transformation we are in the midst of at this point. Control goes back to the people over time given free natural competitive access, which is a timely counter to the automation of work and may allow for some short-term mitigation of AI progress. The pandemic showed us what can happen when control is lifted or artificially restricted. It also showed many of you that employers don’t own you. You’re working for them, but you can work for others instead if you prefer, bringing with you the skills built from your last role, and do the same type of work, even competitive to your former company.

The EU and much of Asia have done away with most non-compete agreements, which happened awhile ago, leaving the US as a major democratic country, largely on an island in this space, lacking free labor movement of this nature, with professional handcuffs holding back up and coming or high potential knowledge workers. Without these restrictions, workers hold their destiny and decision-making rights, so it’s not artificially restricted in economies without non-compete agreements. Workers earn the job and employers provide the work. If you don’t want to participate, then don’t, but you don’t have limitations in your way to move to competing organizations that seem to restrict employees in multiple ways.

This policy ensures employers must take an active role in culture and employee care, forcing an approach of earning labor, not commanding it, due to the structure that has been built with a collective stranglehold on quality of the workplace. Protections will no longer exist for them purely on agreements with many being anticompetitive from a market perspective when you consider what these agreements really do.

Potential Outcomes: Positive or Negative Impacts

• Makes you earn your right to retain your team by winning, instead of restricting and holding back, or using fear to block

• Empowers ownership over an individual’s own work

• Forces you to earn your client’s business every single day vs. having a protective bubble, fostering complacency and mediocrity

• Companies are forced to perform better with client service and associate employment

• Reduces a company’s right to take legal action on an individual for unwarranted reasons, like taking a new job, or using common sense “goog-able” information, labeled as IP (intellectual property)

• Promotes free movement through the labor market and services market, enabling innovation

• Forces active improvement vs. protectionism

• Decreases costs for individual jobseekers

• Provides options and increased earning potential by moving in the market

• Increases cost for organizations, at least in the short-term

• Promotes potential for a bidding war for talent in the short-term, evening out in the long term, placing labor rates more in line with where they likely should be, due to free market alignment

• Less control over clients and associates forces companies to earn business vs. legally protecting it restricting competition, adding value to the market

• Talent moving to other companies increases chances for illegal transfer of protected information

• Forces employers to pay and treat people what they are worth, especially for those that hold the keys to the castle

Like it or hate it, it’s coming at some point, in some form, and this trend will likely continue - more automation, less labor for certain work, and more freedom for the labor market to adapt. An increase in automation and protection of labor movement could be working against finding that market harmony for AI and labor. It’s market evolution and necessary for free movement of talent promoting labor market optimization, unless you find yourself in an organization not prepared and set to lose with this policy.

Please share your thoughts- it would be great to start a dialogue with you -@gpeelle

Hopefully, this added a little value to your business or your career. Thank you for reading. Please repost or share with someone who may benefit from this week’s edition.

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