The economy, the job market, the Animal Health industry and the Veterinary profession have all been on a “roller coaster” during the past four years. Since 2020, we’ve experienced a worldwide pandemic with associated lockdowns, a “mini recession,” a hiring boom following the lifting of the lockdowns, and the Great Resignation.
And now, on April 23 of this year, the Federal Trade Commission made a final ruling on non-compete clauses, voting to ban them by a 3-to-2 margin. According to the FTC, the rule will be officially effective 120 days from its publication in the Federal Register. However, as you might imagine, the ruling is already facing stiff opposition. In fact, the U.S. Chamber of Commerce has already filed a lawsuit against the FTC for what it views as “exceeding administrative authority.”
So, depending upon the outcome of the impending legal battle, the effective date for this new ruling might be pushed back . . . or it might not be implemented at all. This final ruling does differ slightly than the one that the FTC put out for public comment at the beginning of 2023. That proposed rule would have banned ALL non-compete clauses, both present and future. The most recent rule bans all present and future non-compete clauses, with the exception of current non-competes for senior executives.
Senior executives are those who earn more than $151,164 on an annual basis and who are also in what is described as a “policy-making position.” However, once the ruling is effective—once again, dependent upon the outcome of the upcoming court cases—even senior executives will be exempt from non-compete clauses in the future. As a result, these clauses would cease to exist in any form at some point in the future.
Two Sides of the Same Coin
There are two distinct sides to the coin that represents the banning of non-compete clauses: the employer side and the professional (job seeker or candidate) side. These two sides certainly exist within the Animal Health industry and Veterinary profession, as they exist within every industry and profession affected by the FTC’s lates ruling on the matter.
Below, I examine both sides of this coin in more detail.
Challenges for Employers
There are three main challenges for employers. They include increased competition for talent, greater risk of employee turnover, and the impact on succession planning.
Increased Competition for Talent: Without the ability to enforce non-compete clauses, employers may face heightened competition for top talent from rival companies. This could result in bidding wars for skilled professionals, driving up recruitment costs and making it more challenging to attract and retain qualified candidates.
Risk of Employee Turnover: Non-compete clauses are often used as a tool to retain employees by discouraging them from leaving for competing firms. Without this deterrent, employers may experience higher rates of employee turnover, leading to disruptions in workflow, decreased productivity, and increased recruitment efforts to fill vacant positions.
Impact on Succession Planning: Non-compete clauses can play a role in succession planning by ensuring key employees remain with the company long enough to groom and transition their replacements. A national ban on non-compete clauses could disrupt succession plans, forcing employers to reevaluate their talent pipelines and succession strategies.
Opportunity for Professionals
There are also three opportunities for professionals. They include increased career mobility, the ability to negotiate better employment terms, and improved job satisfaction, and work-life integration.
As I did above, let’s discuss these three opportunities in more detail:
Enhanced Career Mobility: A national ban on non-compete clauses would give professionals greater freedom to pursue career opportunities without being restricted by contractual obligations. This increased mobility could enable professionals to explore new industries, roles, and geographic locations more freely.
Ability to Negotiate Better Employment Terms: Non-compete clauses are often included in employment contracts as a condition of employment. Without the threat of non-compete agreements, professionals may have more leverage to negotiate favorable terms, such as higher salaries, better benefits, or increased flexibility in work arrangements.
Improved Job Satisfaction and Work-Life Integration: Non-compete clauses can restrict professionals’ ability to pursue new career opportunities or make career transitions, leading to feelings of frustration and stagnation. Removing these restrictions could enhance professionals’ job satisfaction and overall well-being by allowing them to pursue career paths that align more closely with their interests and goals.
Opportunity in the Midst of Adversity
I believe that there is almost always opportunity in the midst of adversity, and I believe that employers can find opportunity in the midst of the challenges presented by the banning of non-compete clauses. That’s because it would present the unique opportunity for employers to reevaluate their employee retention strategies and elevate their status as employers of choice.
I’ve outlined three of the ways that employers can seize opportunity in the midst of adversity in light of the FTC’s recent ruling:
#1—Creating a Better Workplace Culture
Instead of relying on restrictive contractual agreements to retain employees, employers can cultivate a positive work environment that fosters loyalty and commitment organically. This can include initiatives such as flexible work arrangements, wellness programs, mentorship opportunities, and career development resources that demonstrate a genuine investment in employees’ success and growth.
#2—Strengthening Employer Brand and Reputation
By positioning themselves as employers of choice that value employee autonomy, growth, and career advancement, organizations can attract top talent who are drawn to companies with a strong commitment to employee development and empowerment. This can enhance the organization’s ability to attract and retain high-performing employees who are motivated to contribute their best work and grow with the company over the long term.
#3—Creating Greater Transparency and Trust
Instead of relying on legal contracts to prevent employees from leaving for competing firms, employers can focus on building open and honest relationships with their workforce based on mutual respect and communication. This can create a more positive and supportive work environment where employees feel valued, respected, and appreciated for their contributions, leading to higher levels of engagement, satisfaction, and retention.
It may be a while before we know when—and even if—this ruling by the FTC will be final and go into effect. However, it’s never too early for both employers and professionals to be proactive regarding the goals they have. There is plenty of opportunity for Animal Health and Veterinary professionals to explore and there is ample opportunity for employers to do what is necessary to increase the engagement and retention of their employees with strategies that have proven to be effective.