In late April 2024, the Federal Trade Commission (FTC) issued a ruling banning non-compete agreements, significantly affecting global employment.
Along with other FTC rulings of late, many of the ban’s impacts on global employment practices are broadly positive, working to:
- Empower workers.
- Promote job mobility.
- Foster a more competitive and inclusive labor market.
In other words, these regulatory developments enhance the attractiveness of US workers to global employers, and contribute to a more dynamic and resilient workforce.
But the development has not come without naysayers and some controversy. Let’s take a closer look at the arguments.
Competing opinions
Non-competes have for years been used by employers to restrict employees from working for competitors or starting their own competing businesses for a certain period after leaving their employment. The ban limits employers’ ability to impose such restrictions.
According to Bloomberg, the FTC’s ruling, the result of the agency’s decision to hear from 25,000 employees nationwide, does increase the options of jobseekers and would-be entrepreneurs. Even so, many in the business community are unhappy with the news.
- Intellectual property (IP) free-for-all?
A Forbes article expresses the argument saying non-competes are “one of the few effective ways companies can protect their intellectual property”—understandable despite the restrictions on employees. - Legal storm brewing?
So far, three lawsuits challenge the ruling, The National Law Review reported. Two (one from the U.S. Chamber of Commerce) seek to delay enforcing the ruling; a third indeed argues that the ruling jeopardizes the plaintiff’s IP. - More questions?
Bloomberg Law pointed to confusion over the extent of the impact on private equity. CommLawCenter said complex contracts warranting non-competes received “short shrift.” Both noted a troublesome, broad definition of “employee.”
How employers of record (EORs) fit in
As with most regulatory changes, the effects are mixed, and the raising of legitimate concerns and healthy debate makes for better outcomes. But there are plenty of upsides, too—particularly when looking at the intersection of the ruling with the employer-of-record (EOR) business model.
Simplified compliance
EORs benefit from the simplification this ruling brings. The kind of coordination across multiple jurisdictions that EORs are built to facilitate becomes more straightforward as non-competes fall by the wayside. That makes it easier to help ensure the compliance of customers with labor laws and regulations.
Increased worker choice and mobility
The ban on non-competes also gives workers more choice and flexibility in their career paths. Gone are the constraints of restrictive agreements limiting their ability to seek employment opportunities with competitors—including ones based in different countries.
Indeed, while employees engaged through EOR arrangements have greater freedom in general, they are now even more readily able to explore job opportunities with global companies without fear of facing legal repercussions for violating non-competes.
Greater employee retention for industries
By removing barriers to job mobility, the ban enables workers to stay within their present industry while seeking new employment opportunities. Workers can leverage their skills and experience in their current industry instead of pursuing a career in another sector which may not be able to make as much use of their skill set.
Facilitation of global employment
Overall, with non-competes no-longer restricting talent’s pursuit of jobs with international employers, workers can look forward to encountering far less red tape. That frees up the whole global employment ecosystem, making it ever more likely that workers will take advantage of offers to join globally distributed teams—including through EORs.
A ruling like this that expands both jobseekers’ and employers’ options can ultimately only be a good thing. As our CEO Sagar Khatri has previously said: “We have this concept of the world without limits—a borderless world where boundaries don’t undermine opportunities. Where an individual is born should not determine which job opportunities they have access to. Similarly, where a company is registered should not determine the talent pool it has access to.”
Mutual benefits
The FTC’s ruling aligns with this perspective, as do other decisions of late in the United States. For example, the Department of Labor’s decision to make more workers eligible for overtime pay means U.S. talent can now combine greater earning power with newfound mobility.
Though some stakeholders may find them problematic, these regulatory developments can enhance the desirability of U.S. workers for global employers. Acting alone or in concert with their EOR partners, businesses can now attract the very best talent, from diverse backgrounds—all the while facing fewer legal barriers and less risk.
Want to learn more about how Multiplier can help you take advantage of the newly empowered US workforce? Talk to our experts today!
