Eliminating Non-Competes for Technical Talent

This past week, the FTC finalized a rule that prohibits employers from enforcing non-competes against a large swath of workers across the United States. They determined that these non-competes stifle competition, innovation, compensation, and tie workers to jobs at which they no longer want to remain. The new rule goes into effect in six months, though legal challenges are largely expected.

How This Helps Tech Workers

What does all of this mean for technical talent? On it’s face, this is a great opportunity for these workers.  A large part of working in a technical position is constantly improving and learning new skills. Technology moves so rapidly that those who are not actively learning new skills will fall behind their peers.  Prohibiting non-competes gives these workers the ability to work on side projects, leave their current positions, and ultimately make more money elsewhere.

Tech unemployment is under 3%. Organizations know that when they lose talent to competitors, it will be costly and time consuming to backfill the position.  Non-competes have been a convenient tool to stifle engineers’ resignations. These engineers power and maintain the foundation of many companies’ products and services.

Plus, these technical non-competes are intentionally broad and vague – thrust upon new employees as they sign on-boarding paperwork. Though many are likely unenforceable, the threat of the company’s power over a single employee looms from day one.

Hopefully, this prohibition on non-competes will also force transparency at the employer level. It should drive managers and business owners to be better leaders.

Potential Roadblocks

In addition to the inevitable legal challenges, senior-level tech workers may find themselves in a position where employers may attempt to re-classify their jobs, effectively exempting them from this rule. While the FTC estimates that less than 1% of workers will be exempt from non-competes, technology-based salaries are much higher than other sectors.

The FTC defines a senior executive as someone who is earning more than $151k and is in a “policy-making position”.  There are junior and mid-level engineers who will approach that threshold with only a few years of experience under their belt.  The salary threshold provides a concrete way to classify employees, but there is a lot of wiggle room to interpret whether someone is a “policymaker”.

Moving Forward

Employers will need to notify employees with non-competes that they are no longer in effect and will no longer be enforced.  Job seekers should also be aware of this change and ask the right questions in their job interviews.  If the title and salary are in line with a “senior executive” position, job seekers need to clarify the scope of their involvement in making policy.

Staffing agencies will be a great resource and liaison between employers and job seekers. Staffing agencies already dissect job descriptions, speak with hiring managers, and coordinate with HR leaders when filling jobs.  Agencies should be able to give you information upfront about the scope of work – i.e. working with proprietary processes or making policy decisions.