Skift Take
The Federal Trade Commission has voted to ban employers from using noncompete clauses. Such a ban could affect tens of millions of workers, meeting professionals included.
The Federal Trade Commission (FTC) estimates that 30 million people—one in five U.S. workers — are bound by a noncompete clause in their current jobs.
A new FTC rule bans these clauses. Companies can no longer use them to prevent employees from taking a job with a competitor or starting their own competing business.
The FTC passed the final rule banning non-competes in a three-to-two vote.
How will this impact meeting professionals? Look over your existing non-competes to determine if they will remain enforceable when the final rule goes into effect.
One important exception is for senior executives who earn more than $151,164 annually and are in a “policy-making position.” This is unlikely to impact many meeting professionals, as according to PCMA Convene’s latest Salary Survey, the highest-paid executives and VPs earn an average of $132,600.
FTC Says Noncompete Clauses Suppress New Ideas
“Noncompete clauses keep wages low. They suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” says FTC Chair Lina M. Khan.
Businesses opposing the rule say they will challenge it in court. They claim it threatens their trade secrets and confidential information.
According to the FTC, employers have several alternatives to noncompetes. Trade secret laws and non-disclosure agreements (NDAs) are a way to protect proprietary and other sensitive information. Researchers estimate that over 95% of workers with a noncompete already have an NDA.
How a Non-Compete Limited One Planner’s Income
A non-compete clause caused difficulties for Eli Gorin, CMP, CMM, CEO-Americas at ATS Group, FHTglobal. After a company fired him from an industry job he had a non-compete forced upon him for two years. Living in Florida, such clauses are enforceable even in the case of termination. “This left me with few options to work in my chosen profession and greatly limited my income,” Gorin explained.
“By stopping people from having the opportunity to move on from one job to another, you stop them from having the ability to grow professionally,” said Gorin. “If a company is so concerned about an employee leaving to go work for a competitor, they really need to look at what may possibly be a bigger problem with their business. If they’re really worried that one individual can have so much of an impact, then they may need to reassess where they’re at.”
Work in Progress
This rule is still a work in progress. Gorin advocates for more clarity regarding those bound to non-competes after leaving or being terminated from a company. In addition, what compensation qualifies someone as a senior executive? Is that base salary or overall compensation?
“While not perfect, it’s an absolute step in the right direction. Non-competes are nothing more than professional cowardice. They are only imposed by those who do not have confidence in their business and are afraid of competition. Treat your people right, and there is no reason to worry about them running off to compete. If it’s a matter of salary and you cannot afford to increase pay, then that is a personal business decision and not the fault of the employee,” said Gorin.
He adds that this does not negate or eliminate non-disclosure agreements, which are a matter of ethics and remain legitimate and enforceable.
