The FTC Comes for Noncompetes

Is there still gardening leave? Yesterday, the US Federal Trade Commission voted to ban employee noncompete agreements in the US.1 Future noncompetes are banned; existing noncompetes are enforceable only for senior executives.2 The rule goes into effect in six months, and there will definitely be lawsuits to block it.

In the final rule document, the FTC notes that “employers subject even middle-income and low-wage workers to noncompetes on a widespread basis,” but of course noncompetes are also common for high-income workers in the financial industry. There, noncompetes are not entirely a bad thing for workers. “All I know is power-washing and these business owners all want me to sign a noncompete clause,” says a power-washer cited by the FTC. “It’s one big circle of wealthy business owners keeping the little man down.” But on the r/quant Reddit board feelings are mixed, and you can find posts saying things like “would suck if this means no garden leave is available anymore.” In the financial industry, there is a common norm that, if you leave a job, you are not allowed to work for a competitor for some period of months or years, during which you are still paid by your old employer. This makes it harder for you to get a new job and reduces your negotiating leverage at your current job, and if you do leave, the enforced time off devalues your skills and holds back your career. On the other hand: year-long vacation! There are probably some people who structure their financial careers around maximizing gardening leave. Did the FTC end that?