The Federal Trade Commission (FTC) has voted to ban noncompete clauses, a move that could impact a sizable percentage of the nation’s tech professionals.
According to the FTC, some 30 million people are bound by noncompete clauses in their current positions. While noncompetes are usually framed as a key method for employers to prevent highly specialized talent (such as software engineers focused on cutting-edge technology, including artificial intelligence) from immediately jumping to a rival company, they’ve been increasingly applied to a variety of roles, including fast-food workers.
“Noncompete clauses keep wages low, 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,” FTC Chair Lina M. Khan wrote in a statement accompanying the decision. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
However, the FTC’s move will spark pushback. For example, the U.S. Chamber of Commerce, one of the country’s most prominent business lobbies, plans on filing a legal challenge. “This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy,” Suzanne Clark, the Chamber's president and CEO, told Reuters.
What Does This Mean for You?
Roughly one-third of those working in computer and mathematical fields are bound by noncompetes, along with 36 percent of engineers and architects, according to research from the Universities of Maryland and Michigan (many thanks to Wired for surfacing that data). For those specialists who’re interested in jumping jobs, but worried about their current employer launching a bunch of lawyers in their direction, the FTC’s ban will take effect 120 days after it’s published in the federal register, after which point they’re presumably free to accept offers from anyone willing to meet their compensation demands.
But there are some caveats. “Under the final rule, existing noncompetes for senior executives can remain in force,” the FTC stated in a helpful explainer. “Employers, however, are prohibited from entering into or enforcing new noncompetes with senior executives. The final rule defines senior executives as workers earning more than $151,164 annually and who are in policy-making positions.” If you’re a tech executive, in other words, you might still be bound by your existing contract.
Whether the FTC’s move will unleash a seismic shift in tech, compelling thousands of very bright technology professionals to suddenly leave their jobs, is an open question. It could certainly impact how companies pursue talent—if a hiring manager doesn’t need to worry about noncompetes, they could consider a far broader range of specialized candidates for a position. If you’re on the hunt for a new job, stay aware of how this new rule will impact you and your career.
