Open Competition….for Talent

May 14, 2024

I know….FTC….snoozefest. This is a talent issue so please keep reading.
The Federal Trade Commission (FTC) released a rule yesterday banning non-competes.  I don’t weigh in on public policy matters too often, but this one really caught my eye.

In my past roles as an HR leader for organizations, I always disliked these clauses. I disliked having to deal with them when I was trying to recruit great talent. I remember interviewing an exceptional operations leader who left a competitor and had broad non-compete language in her employment agreement. There was no way it was enforceable, but the company put up enough of a stink when other employees had gone to competitors that it scared this person too much to join us. I also disliked explaining the noncompete clause to prospective and departing employees and disliked any participation in enforcement. I have been subject to several non-competes, so I have perspective on both sides of this issue. I don’t like them.

I do believe in non-disclosure language to protect trade secrets of the company. Additionally, I am in favor of non-solicitation language protecting the employers in the short term. There are agreements that have yearlong non-solicitation clauses. I think that is too long.  Employers just need enough time to react to the departure and re-solidify customer relations before the departed employee puts their hooks in.  If you can keep customers no matter who services the relationship, you are doing it right.  If the departed employee can woo the customer away after 90 or 180 days then the company is doing something wrong by not being able to prevent that.

At the end of the day, this is a talent issue as much as it is a customer retention issue. If you can’t keep your talent happy and need to use non-competes or lengthy non-solicitation language to stifle their urges to move to greener pastures, then you are, again, doing it wrong. Spend the requisite time and energy to create a culture and an employee value proposition (EVP) that employees don’t want to leave. Then make sure to hire only those aligned with your culture and EVP.

Do you have non-competes that will no longer be enforceable, and you are worried about retention? Or do you want to proactively build a culture that attracts and retains the best talent? Either way, reach out to your friendly neighborhood Thrive Coaching and Consulting talent consultant to help you with this.

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