Companies are gearing up for mass resignations after a new non-compete ban goes into effect. As a result of the change, nearly one in four business executives said they think employees will quit and find new jobs, according to a recent Clarify Capital report.
The Federal Trade Commission recently voted 3-2 to ban non-compete agreements, which experts say is already having ramifications across the job market. Previously, non-compete agreements put contractual conditions in place, often preventing employees from quitting as well as from starting their own businesses.
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“The non-compete clause was one of those tactics that kept employees tied to employers even when said companies treated their staff poorly,” Andy Nisevic, the director of One Degree Training and Coaching, told Newsweek. “The ban of it therefore will lead to poor employers facing an exodus because opportunities will become open elsewhere. There is a saying that people don’t leave their jobs, they leave their bosses.”
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In the survey, one in five employees indicated they had been restricted by a non-compete clause. A majority of those people said it had impacted their earning potential and career mobility.
Altogether, 72 percent of employees were in favor of the ban, with around the same, 70 percent, of business executives in agreement. However, business leaders have concerns about how it could affect their companies.
Roughly 24 percent said employees will likely leave for new employment opportunities due to the change, and 16 percent said they can foresee employees leaving to start a rival business.
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There are some ways company leaders are thinking about preventing this, though. Around 88 percent of employees said increased wages could prevent them from leaving. Meanwhile, 61 percent said increased bonuses would do the trick.
Nisevic said companies who invest in staff development, mentorship and development as well as a promising culture should not feel threatened by the new ban.
HR consultant Bryan Driscoll also questioned the executives who felt certain their employees will up and leave now that the non-compete agreement ban is in place.
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“If executives are concerned about mass resignations, it’s a clear sign their organizations have not been successful in maintaining employee morale and satisfaction,” Driscoll told Newsweek. “The overreliance on noncompetes often serves to trap and imprison employees rather than genuinely inspire loyalty or commitment.”
Due to this, Driscoll doesn’t foresee a mass exodus, but instead a career reshuffling as employees choose positive work environments and fair compensation.
“The top incentives that would retain employees, like increased wages, bonuses, and flexible work arrangements, underscore that the problem isn’t with employees seeking better roles, but with employers failing to meet workers’ needs,” Driscoll said.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.