Navigating the New Normal: Non-Compete Agreements in Flux

The Old Jarhead is back with career advice on Non-Compete Agreements.

• Non-compete agreements are contracts that restrict an employee's ability to work for a competitor after leaving a job.

• Employers use them to protect their trade secrets and investments in employees, but they can limit job opportunities for workers.

• The US Federal Trade Commission recently ruled that non-compete agreements are no longer legal, sparking debate and potential legal challenges.

• The Old Jarhead has experience on both sides of the issue and offers his thoughts on the ruling.

• He believes the FTC exceeded its boundaries, and the impact may be minimal for junior and mid-level employees but could be detrimental for small businesses with valuable trade secrets.

• Ultimately, lawyers and lobbyists will likely profit from this decision while it is being sorted out.

• Business owners shouldn't panic yet, and employees still constrained by non-compete agreements shouldn't celebrate prematurely.

• To keep growing professionally, he recommends checking out his podcast, "Be the Ultimate," and giving his book, "Find a Job That Fits Your Life," a read.

Transcript

Speaker 1: 0:02

All right, folks. Well, it's the old jarhead and I'm back again, as always, to give you some great advice. If I sound a little different today, I have a cold so I'll try not to sniff or whatever. So here's a current one for you. Okay, we're going to talk about, as you can see by the title, non-compete agreements, so very current.

Speaker 1: 0:29

So what is a non-compete agreement? Well, basically it's a contract you sometimes sign when you start a job that says if you leave that job, you can't work for a competitor for a period of time, or sometimes within a certain geographic region. For example, if you leave Acme Company and I just made that up, you are not allowed to work in a similar industry for two years and within 50 miles of Acme's headquarters. That's just an example, right, so it constrains the worker. Do you always get one of these? No, not, some companies don't, but it's a constraint on a worker. So why do we have this? I mean, why do workers don't want them, right? Well, it's because the employer wants to protect things like their trade secrets and processes, et cetera. Employers spend a lot of money developing their product and their concern is that you will take what you learn at the company and their training that they paid for, and go work for a competitor and try to take away their business, their livelihood. So why do employees sign them? Simply to get the job they want? What happens when they get that job and it isn't what they want, or a better job comes along contractually, if that job is with a competitor, it leaves them open to legal action by their former employee Employer. Wow, okay, so much for that stuff.

Speaker 1: 1:56

Why are we talking about that now? Well, because the US Federal Trade Commission signed a ruling that non-compete agreements are no longer legal. Employers, with some exceptions, cannot enter into or, after a period, cannot enforce existing non-compete agreements. So this is being held by employees and their advocates and it's being fought by employers and their advocates Great. So what does the old jarhead have to add to this discussion? Well, a couple of things. I've been on both sides of this coin, and by that I mean I benefit from former employees not being able to take business secrets to my competitors, but I also had to sign one myself and I knew that if I left my company I could be constrained in my next job. So here are a couple of my thoughts job.

Speaker 1: 2:47

So here are a couple of my thoughts. First, I think the FTC exceeded its boundaries by making this ruling. I'm not sure why an organization that exists, to quote protect the American consumer, should be allowed to make this rule, except that it's politics and vote buying by the current administration. This will also make challenges to that ruling more likely to succeed, okay. Second, the fact is these things are rarely enforced, especially against junior and mid-level people.

Speaker 1: 3:15

There are other laws about not hindering people's ability to earn a living that come into play and there just may not be enough risk to the business to justify the legal cost. That could be different for very senior people who have much more insights into the company's finances and things like that. Third, this could be very bad for small businesses, starting out that if their trade secret, their secret sauce, is given to a competitor, especially a large one, they could be put out of business. That just makes starting a new business and already hard task even harder. And do we want that? Do we want to end up like some countries and and I just was in one in Europe that it's very hard to start a business? It's not good, okay.

Speaker 1: 4:01

In the end, the ones who will make money on this deal will be the lawyers and lobbyists who will fight this out, with the possibility that it'll all be nullified after the next election. Well, anyhow, that's my take on this. Bottom line is if you are a business, it's not time to panic, and if you're an employee constrained by this, it may be too early to celebrate. Both of you should worry about other stuff while this gets sorted out. All right, thanks for listening and please recommend my Be the Ultimate podcast to your friends and check out my book. Find a Job that Fits your Life. Thanks, bye, Thank you, thank you.