If you’ve ever worked in a startup company, or been in a role with a bigger company that had proprietary knowledge of the company’s products and services, then you’ve probably signed a non-compete agreement. The feds are pushing a new rule that would ban non-competes completely, but what would that mean for companies, workers, and their Paychecks?
Here are Five Fast Facts about the proposed ban on non-compete agreements:
- 🔍 The Definition - A non-compete agreement is a contract between an employer and an employee preventing that employee from working for (or starting) a competitor for a certain amount of time after they are no longer an employee. It also prevents the sharing of proprietary information by the employee after they leave the company. Think of it as a retroactive legal shield for the company - invisible legal handcuffs and a gag!
- 🚫 The Rule - The new rule bans non-compete agreements as an “unfair” method of competition. The rule will take effect six months from when it’s finalized and published, which could happen anytime now. Or, with the government’s typical efficiency, maybe a decade from now.
- 👎 The Industry Perspective - Research shows that non-competes have a bad effect on industries overall, especially high tech industries. They prevent high performers from driving their careers or starting new businesses. This in turn reduces market pressure to increase wages and keep producing better products. Ugh, stagnation. It’s bad for literally everyone, customers included!
- 😱 The Employer Perspective - Banning non-competes isn’t great news for individual employers. These agreements protect the time and money spent training employees or building their proprietary knowledge, and especially with highly skilled or highly placed folks that can be a lot. Having them leave can be a major problem for the company, especially if they take critical information to competitors. It would be like Patrick Mahomes leaving the Chiefs and going to the Raiders, and sharing the Chiefs’ playbook with them. Just a wee bit of a problem for the Chiefs, no?
- 💰 The Bump - The new rule is estimated to increase workers’ earnings by as much as $300 billion per year. That’s a lotta cheddar, and one heckuva silver lining!
🔥Bottom line: It will be interesting to see how this plays out. For individual workers, this could be really good, as more flexibility will allow them to find ways to make bigger Paychecks. For companies, industries, and the buying public in general, though, this may have some bad long term effects. Time will tell!
What do you think about non-competes and this new rule?
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