FTC Bans Non-Compete Agreements

[Ravens_Shadow]

A huge win for any budding entrepreneur to do what their day job does as a business. Hopefully this stops a lot of shitty businesses from existing and spawns a much better competitive environment.

FTC Announces Rule Banning Noncompetes

Today, the Federal Trade Commission issued a final rule to promote competition by banning noncompetes nationwide, protecting the fundamen

www.ftc.gov

“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,” said FTC Chair Lina M. Khan. “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.”

 

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[Black_Dragon43]

This is huge — many people have the golden ticket to break out of wage slavery right here, but somehow I doubt most will take advantage of it. They love their chains too much!

My legal team always advises to have noncompetes, but personally I’ve never worried about someone competing with me. I freely share my knowledge and what I do. Most capable people already pursue their interests & opportunities and don’t care about mine except in-so-far as it can also help them or they can adapt it to their industry. Which leaves the incompetent — and well, even if the incompetent were to compete with you, it’s not a threat.

 

[amp0193]

Hopefully this stops a lot of shitty businesses from existing and spawns a much better competitive environment.

I have non-competes in my employment agreements (for salaried employees, not hourly warehouse ones).

The scope of the non-compete is really narrow (as anything that isn't narrow is hard to enforce). I'm sure there are lots of shitty businesses that have a much wider scope as a method of intimidation.


I saw this headline this morning, and wasn't sure how to feel about it. In any case, doesn't matter how I feel about it, will just adapt and move on as what the government wants to do is outside my control.

 

[Black_Dragon43]

I have non-competes in my employment agreements (for salaried employees, not hourly warehouse ones)

In a certain sense if your business can be replicated by someone just by access to knowledge it’s not a real business.

You can’t replicate Microsoft just by accessing their knowledge for example.

Of course legal teams will always advise you to set as many roadblocks as possible — that’s the principle of good security after all, multiple layers of defense.

 

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[amp0193]

In a certain sense if your business can be replicated by someone just by access to knowledge it’s not a real business.

My business is a real business.

But if someone has been working here 6 years, and then goes to work for 1 of the 2 direct competitors in my space, and knows everything about everything, including all of our future plans for the next 3-5 years, all of our supplier relationships, all of our logistical hacks and shortcuts, and all the details on the 3 patent pending products in development... that sure as shit would be damaging to my business.

That company would still struggle to be competitive with us, but I'd prefer to keep trade secrets a secret. It's one of many things that create the moat around our business.

 

[Black_Dragon43]

My business is a real business.

But if someone has been working here 6 years, and then goes to work for 1 of the 2 direct competitors in my space, and knows everything about everything, including all of our future plans for the next 3-5 years, all of our supplier relationships, all of our logistical hacks and shortcuts, and all the details on the 3 patent pending products in development... that sure as shit would be damaging to my business.

That company would still struggle to be competitive with us, but I'd prefer to keep trade secrets a secret. It's one of many things that create the moat around our business.

I know many people who think the way you do on this issue. All I was saying is that I don’t personally agree.

Think about it this way. If your “trade secrets” were so valuable, what stops your competitors from paying your employee an enormous amount of money (compared to his salary) to get access to it?

Knowing what your competitors are up to is a good thing. But not in order to copy them… rather in order to see the most effective way to position yourself.

You can’t beat your competitors by copying them. Often it’s not even a question of “beating” your competitors unless you’re in an industry that depends heavily upon network effects (like Facebook & MySpace were).

In most markets, clients will buy from MULTIPLE suppliers during their lifetime. You’re just one of them, regardless of how indispensable you want to feel your product is.

So really, you guys are just losing money by fighting. If you got together with your 2 direct competitors and raised prices by 30-40%, then you’ll all see real profits and paradoxically you’ll also develop the market faster by having access to more money, and hence better talent.

You can check out my previous thread: MARKETING - Competitors are Our Friends — Clients Our Enemies

 

[amp0193]

If your “trade secrets” were so valuable, what stops your competitors from paying your employee an enormous amount of money (compared to his salary) to get access to it?

The employment agreement that forbids said employee from doing that.

Could still happen, but there would be legal recourse.

In most markets, clients will buy from MULTIPLE suppliers during their lifetime. You’re just one of them, regardless of how indispensable you want to feel your product is.

Not in this market. It's a $6000 one time purchase in 99% of cases. Very much an either/or purchase decision.

So really, you guys are just losing money by fighting. If you got together with your 2 direct competitors and raised prices by 30-40%, then you’ll all see real profits and paradoxically you’ll also develop the market faster by having access to more money, and hence better talent.

What you suggested is highly illegal. My competitor invited me out to dinner a couple of years ago and proposed to jointly manipulate prices, and I told him (politely) to F*ck off.

My prices are higher than any of theirs anyways (because our product and service is better).

Sounds like you're in favor of the FTC rule that is the topic of this thread, but not the existing FTC rules about price collusion.



In any case, this ruling doesn't really affect me. Non compete clauses only offer some protection in some very unlikely edge-case scenarios that will probably never take place, as I treat my employees extremely well and pay them well.

 

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[Black_Dragon43]

What you suggested is highly illegal. My competitor invited me out to dinner a couple of years ago and proposed to do just that, and I told him (politely) to F*ck off.

My prices are higher than any of theirs anyways (because our product and service is better).

Sounds like you're in favor of the FTC rule that is the topic of this thread, but not the existing FTC rules about price collusion.

I’m not suggesting anything, I simply stated a cause and effect rule (“if X, then Y”), it’s up to each person’s moral compass to decide where they stand on that and consider any legal ramifications before acting. That goes without saying.

However, my position is generally in favor of LESS regulation / red tape. I see noncompetes as just more red tape.

 

[amp0193]

That goes without saying.

Didn't seem like something that went without saying, but your clarification here is noted, and makes more sense why you would suggest that in the context of the below:

However, my position is generally in favor of LESS regulation / red tape. I see noncompetes as just more red tape.

Fair

 

[MitchC]

In any case, doesn't matter how I feel about it, will just adapt and move on as what the government wants to do is outside my control.

It's not the government

The government just got out of the way and allowed the employee to do whatever they want

Which you have no control over other than to incentivise them to do the right thing

Also in relation to the conversation you had below this, aren't NDA and non-compete different? You could still have an NDA?

In either case I think this is an interesting and positive change

I saw one article about how the beauty industry may be about to be shaken up

Apparently 3-6 month non-compete is normal there and most employees don't want to take that gap so they stay where they are

Now they are free to move around which should be interesting

I can see this resulting in higher wages and better benefits, especially for retention

 

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[Black_Dragon43]

As a sidenote, this seems to apply only to employees and independent contractors, existing non-competes with senior executives remain in place. And you are also legally required to notify workers (including those who no longer work for you) where it applies that non-compete clauses are no longer at play. NDAs that function as non-competes are also banned: On the FTC’s Non-Compete Contracts Rule

 

[StrikingViper69]

I can see this being a problem. Company A figures out some way to get an advantage, then an employee quits and goes to Company B to give it away.

In terms of an innovation that can, for example, be patented, this wouldn’t affect things, that’s still protected; but the more mundane aspects such as operations, suppliers, SOPs are all up for grabs now.

 

[Panos Daras]

I think banning non-competes is a good idea. That being said I am not sure of the real impact on the economy. The numbers mentioned in the article feel quite optimistic. I hope the real impact is big so that more countries implement this.

 

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[amp0193]

In either case I think this is an interesting and positive change

Generally speaking it probably is a net positive.

Gives an advantage to smaller companies taking on big ones, like @Ravens_Shadow .

Also incentivizes companies to treat their employees well.