Post FTC Ruling: Why Leadership Teams Need to Prioritize Workplace Culture to Protect Cash Flow

The FTC estimates that banning noncompetes will result in more than 8,500 additional new businesses created each year...Higher earnings for workers with minimum wage for non-exempt employees up almost 40%...It is expected to lower health care costs by up to $194 billion over the next decade** (more on this later)...Expected to help drive innovation, leading to more patents for the next 10 years .

It is estimated that 1 of out every 5 workers [nearly 30 million Americans] are subject to a noncompete; with the increase to those worker earnings being nearly $500 billion (with a "B") over the next 10 years. Where do those billions of earnings come from? Out of the pockets of the organizations that they currently work for?

Business Groups vow to sue; but what if FTC ban is upheld...

Lets talk about some of the obvious challenges businesses would have:

1. Loss of Talent Retention: Businesses may find it challenging to prevent employees from leaving to work for competitors, potentially leading to a talent drain.
2. Impact on Innovation: Businesses may face increased risks of intellectual property theft and decreased motivation to invest in innovation and research and development.
3. Business Competition: Businesses may face heightened competition as employees have more freedom to switch employers, potentially leading to increased competition for talent and market share.
4. Legal Compliance and Risk Management: Businesses that rely on noncompete agreements as part of their employment practices would need to revisit their HR policies and contracts to ensure compliance with the FTC ban.
5. Negotiating Power: Businesses may need to find alternative strategies to safeguard their competitive edge and negotiate terms that protect their interests.
6. Employee Mobility and Job Flexibility: Banning noncompetes could enhance employee mobility and job flexibility, allowing workers to explore new opportunities and careers more easily.

Lets talk about that last one - Employee mobility/job flexibility...

No secrets here, we are talking about high performing sales associates as well as direct revenue generating associates; both new business coming in, as well as current business leaving; are the biggest risk for employers.

I'm sure every executive team is meeting and assessing potential "flight risks" and what measures they have in place to protect themselves. I could write the whole article on this topic alone, but the risk here is obvious. Some less obvious ones...

What else snuck into this ruling...

Minimum wage for non-exempt up from $36k to $58k (?!?!?!)...

Nothing to see here! Yikes! HR teams again will bear the brunt of these new changes. Not quite as bad as COVID, but no walk in the park either.

Not only does it call for a complete redraft of policies for current and new employees(mentioned in article above), hiring practices will have to evolve, there are new overtime rules, as well as navigating the minimum wage increase. These will be major areas of concern for business leades that will have to be addressed immediately - HR Consultaning Leader, Allison McEachern

Allison also drafted an action plan for businesses to be prepared.

Action Items for Employers:

1. Review Agreements: Revisit restrictive covenants to ensure compliance with the new rule.
2. Consider Alternatives: Explore other options to protect business interests, such as non-solicitation or confidentiality clauses.
3. Stay Informed: Monitor legal developments and regulatory changes regarding noncompete agreements.

Call to Action:

In light of these changes, it's more important than ever for employers to engaged with experienced HR professionals who can navigate these complexities and ensure compliance with evolving regulations. If you need assistance with HR support and services, including navigating noncompete agreements, RogersGray’s HR Consulting Group is here to help.

**Healthcare costs expected to decrease...

The Commission also notes that it received a large number of comments from physicians and other healthcare workers stating that non-competes exacerbate physician shortages. - FTC Ruling

Obviously for someone in my industry, employee benefits, healthcare is the major piece of our day to day with businesses; plan architecture, design, and most importantly cost control and popualtion health management.

So how does banning noncompetes lower heatlhcare costs? A reminder of where we are today. According to an American Hospital Association fact sheet, there will be an estimated shortage of up to 3.2 million healthcare workers by 2026.

Hospitals and health systems now face mounting and critical staffing shortages that could jeopardize access to care in the communities they serve...AHA survey data show that between 2019 and 2020, job vacancies for various types of nursing personnel increased by up to 30%, and for respiratory therapists by 31%. These shortages are expected to persist...showing there will be a shortage of up to 3.2 million health care workers by 2026.

How do we make sure Employees won't jump ship

Any of these articles should do the trick:

April 2024: Wellbeing in the Workplace

March 2024: Managers Impact on Mental Health

January 2024: Investments in Employee Financial Health

August 2023: Invest in the Wellbeing of your People

Webinar: Building the Elements of a Successful People Experience

Heck, the whole library can be found HERE along with a few webinars HERE. Pretty much everything we consult about connects back to this thought process of wellbeing. A focucs on employee wellbeing drives culture and engagement. A reminder of our view on the "People Experience" and wellbeing. More is sure to come!

If you are interested in any of these topics and would like to push the conversation further, please reach out! [email protected]