How the FTC's Non-Compete Ban Impacts Engagement and Retention Strategies

The Federal Trade Commission (FTC) issued a final rule in April 2024 that significantly restricts non-compete agreements between employers and employees. This ban, effective around September 4, 2024, represents a major shift in the American workforce. Employers can no longer rely on legal handcuffs to keep talent from leaving.

The ban applies to both new and existing non-compete agreements for most workers, including full-time employees, independent contractors, and interns. While existing agreements with senior executives (making over $151,164 annually and holding policy-making positions) might still be enforceable, employers cannot create new ones even for this group.

The New Retention Landscape: Why Engagement Matters More Than Ever

Prior to the ban, non-compete agreements provided a false sense of security regarding employee retention. With this freedom to explore new opportunities, employees now have an advantage. With workers free to explore other opportunities, employers must prioritize genuine engagement to keep their top talent. With this new ban:

• The ability to switch jobs without contractual limitations will likely lead to higher turnover, especially if employees feel stagnant or undervalued.
• Companies will face stiffer competition not just for attracting new talent but also for retaining their existing workforce.
• Employees will likely have higher expectations for organizations to provide a fulfilling work environment that supports their growth and development.

Building Loyalty Through Engagement

Post-COVID, employers have been struggling to hire and keep great talent. A new survey from Chief Executive found 60% of CEOs said retaining and engaging employees is their top priority in 2024. Cultivating a work environment that fosters loyalty and discourages employees from seeking greener pastures should be a key priority, particularly with the new non-compete ban. Employers who focus on building a strong employer brand that fosters a culture of engagement can keep employees happy, motivated, and less likely to leave. Consider:

• Investing in training and development programs that help employees grow their skills and advance within the company.
• Implementing programs that acknowledge and reward employee contributions, fostering a sense of value and appreciation.
• Reinvesting in your employee's well-being by offering flexible work arrangements, competitive benefits packages, and a healthy work-life balance to create a truly attractive workplace.
• Creating psychologically safe workplaces where there's open communication, and employees feel comfortable sharing ideas and taking risks.

The Bottom Line

It's important to note that the FTC's rule is new, and its full impact is still being debated. Some legal challenges are expected, and there may be clarifications issued by the FTC in the coming months.

Regardless of these challenges, the ban presents an opportunity for employers and workers. While it expands opportunities for workers, by prioritizing employee engagement and development, companies can build a loyal and thriving workforce that remains competitive in the face of increased job mobility. This can translate to improved productivity, innovation, and a competitive edge. Ultimately, it's not about locking people in; it's about creating a work environment where people want to stay.

Ready to boost retention in the face of the non-compete ban? Click here to learn how we can help.