54 - Banning Non Competes: Good for Workers, Businesses and the Economy

Today, we’re taking on a topic you’ve probably heard of – it may have even impacted you personally. But you might not be aware just how linked it is to the issue of diversity and inclusion.

 

We’re talking about noncompete agreements.

 

Noncompetes have long been a staple in corporate America. But, despite supposedly being in place to protect trade secrets, many workers, including low earners, have been subject to this practice, greatly restricting their career options, flexibility and earning potential.

 

And that’s especially the case for underrepresented voices. A number of studies suggest that noncompete agreements more strongly affect women and people of color, with one finding that strict enforcement of noncompete agreements lowered the wages of women and people of color by twice as much as white men.

 

But things are starting to change. Last year, the FTC announced a rule banning noncompetes. Whilst it was largely welcomed by workers, not all employers were so happy about it. 

 

So we’re going to dive into the issue today. We’re going to talk about what noncompete agreements are, how they harm workers, especially women and other underrepresented voices, and share ideas for how organizations can build trust and employee retention, without restrictive contracts.

 

 

IN THIS EPISODE:

 

[01.38] Introductions to our Blended panelists.  

·       Kiran – Founder and CEO of M2M Business Solutions, and CEO at Brar’s  

·       Karin – CEO at NIRAKIO

·       Chelsey – Founder of The Asterios Group

 

[05.08] The group discuss noncompete agreements – what they are, their purpose, why people sign them, the challenges, and how they ultimately harm workers.  

·       Restricted transitions from employed to self-employment/entrepreneurship

·       Restricted employed career growth

·       Can they actually be managed?

·       Who really wins?

·       Who is considered competition? – Understanding your exposure as an employee

·       Regular monitoring and updates  

·       Challenge to enforce

·       Time and cost implications

·       Role in sales

·       Negotiation

·       Complexity

·       Intent

·       Lack of understanding – employees often don’t understand the potential depth of the contract

·       Ethics/integrity

·       Multitude of agreements:

o   Noncompete

o   Non-solicitation  

o   Exclusivity

o   Separation agreements

o   Mutual non-disclosure  

o   Confidentiality

o   NDA

·       Making it too easy to sign

·       Different interpretations/translations/meanings  

·       Contradiction

·       Trust

·       Impact of words on culture

·       Role of technology

·       What can you actually restrict?

·       Can you restrict people and not AI?

·       Evolution of noncompetes

·       Company IP vs personal IP  

·       Impact of job-hopping

·       Retention incentives  

·       Asking for more money

·       Creating the right culture

·       Impact of economic conditions and market changes

·       Judgement

·       Senior vs junior employees

 

“At the highest level, it sounds like a good idea. It’s at least a good idea for the employer, but not always for the employee.” Karin

“It’s a system that’s put in place with the right intentions, to overcome certain issues, but I personally feel that it doesn’t fulfil the requirements either for the employer or the employee.”  Kiran

“It was originally designed to protect companies, but I don’t think that’s where it’s sitting today.” Chelsey

“It’s something that has to be monitored, managed and updated – and potentially resigned on a  regular basis, if a company is serious about its intent behind the noncompete. That’s very expensive, and each and every time you request an employee to re-sign, it’s a time for that employee to reconsider if they still want to be a part of that organization.” Karin

“Fewer than 10% of workers negotiate these agreements.” Chelsey  

“Can everyone talk about the meaning of the words?! The words have lost all meaning, they’ve become buzzwords... Let’s talk about the words as part of impact on culture.” Kiran

“It’s so hard to restrict information in a human brain. If I’m an employee in one place and go to another, I didn’t say anything about my previous job… but I still have lessons learned and knowledge, I’m not sharing information customer-to-customer, but I’m going to have new solutions. There are certain things you can’t restrict, even when you’re being ethical.” Kiran

“When you build a body of expertise in a particular market segment, you’re more valuable in that market segment… My personal IP makes me more valuable, so why would I want to restrict my ability to serve within that area?” Karin

“30-40% of employees are asked to sign an agreement AFTER they’ve already accepted the job.” Chelsey

 

[01.04.22] The panel share their stories and personal experiences of encountering noncompete agreements, and the lessons they learned.

·       Impact of coaches and mentors

·       Legal costs

·       Signing without reading

·       Asking questions

·       Impact of age

·       Impact on industry as a whole

·       Personal power

·       Time boundaries around restrictions 

·       Pay attention to the ‘what-if?’

·       Transparency

“Employers: try to build a culture of trust, celebration and appreciation – make your company a place people don’t want to leave. And if they do, they don’t want to hurt you!” Chelsey

 

[01.15.18] The group sum up their thoughts from today’s discussion.  

 

RESOURCES AND LINKS MENTIONED:

You can connect with Chelsey, Karin, and Kiran over on LinkedIn.  

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