FTC has its eye on non-competes; could be a thing of the past | Sheila Long O’Mara

Spend a bit of time at an industry event, and the topic of musical chairs is bound to come up, as executives throughout the home furnishings industry tend to bounce around from company to company.

Sometimes the best and brightest ones are quietly sitting on the sidelines awaiting the expiration of a non-compete agreement. Those pesky contracts that companies like to have new hires sign in the hopes of locking them down and keeping them from joining a competitor or hanging out their own shingle often take immense talent out of the employment pool for six months to a year.

Or, what often happens is that said executive or employee works quietly in the background until such an agreement is no longer valid. Other times, such agreements have in the past made other companies hesitant to hire the best person for the job out of fear of a lawsuit from a previous employer.

For what it’s worth, I’ve always thought of a non-compete as a scare tactic that some employers use to hold great employees hostage through fear. I’ve always wondered why an employer would want to keep great employees out of force or fear by using a flimsy piece of paper. Managing out of fear or through distrust is a surefire buzzkill for corporate culture, which often results in a revolving door.

Big news recently from the Federal Trade Commission regarding non-compete agreements, which proposed such agreements be banned. The commission is accepting public comment through March 10; those comments could impact the final rule.

Currently, the FTC, said non-compete agreements nearly always benefit the employer and “harm competition in U.S. labor markets by blocking workers from pursuing better opportunities and by preventing employers from hiring the best available talent.”

The proposed rule would prohibit employers from using non-compete clauses. The new rule would make it illegal for employers to enter into or attempt to enter into a non-compete with a worker; maintain a non-compete with a worker; or represent to a worker that the worker is subject to a non-compete.

In addition to blocking future agreements, the new rule would require employers to rescind existing contracts and inform employees that they are no longer in effect.

Rarely do such agreements benefit the employee, but instead are often written from the company’s standpoint. They hinder talented executives, team members from landing their next gig, often causing financial struggle.

I’ve often wondered how a court could possibly side with companies when hard-working people are ready, willing and able to secure active employment, and the only roadblock is a non-compete agreement.

And another thing, such contracts have also been construed under the aegis of protecting company strategy or intellectual property. Let’s be real here. There are few secrets in the home furnishings and mattress business. Face it. We are an industry filled with people who like to boast about what they know, and rightly so.

We have an immense amount of talent in all parts of this business. That’s part of what makes home furnishings such a great place to be, and why people come into the industry and rarely leave.

If the FTC’s proposed rule holds, it could help us hold onto that great talent and not lose it to other industries.