I see that the FTC banned it and (from what I see) it seems like a good thing. Why?
In: Economics
TLDR: This is actually a big win for employees and a long time coming. Non-competes prevent you from competing with a former employer for a set period after you quit. These agreements are very one-sided in favor of a business, and arguably predatory behavior because companies don’t really give employees a choice but to sign it.
Non-compete clauses are one-sided agreements that put short term limits on what kind of work you can do after you leave a company (quit or are fired).
For example imagine you work in the IT field as a consultant that has a couple dozen clients. You may have a non-compete clause that prevents you from working for one of said clients for 6 months to a year.
This is to protect your employer from a client hiring you directly, or a skilled person leaving and taking all of their customers with them.
One the surface this seems fare enough, but these agreements are horribly one-sided and there are scenarios where a non-compete effectively makes you unemployable in your industry for a set period.
If for example you career is based on being an expert on a specific software product, and by design you have regular contact with all customers that run that particular product. If you quit you can’t work for any of them making you effectively unemployable. So what are you supposed to do for 6 months? work at a McDonalds?
Depending on where you live non-competes are often unenforceable because you can’t prevent a person from working and earning a living. You can however make their lives difficult, and even sue them or their employer depending on the contract. It is however a bit of a grey area. There’s numerous ways to get around a non-compete.
Alternatives include NDAs forbidding people from taking trade secrets with them to new employers, or gardening leave.
In Formula 1 for example many senior people have gardening leave clauses in their contracts. If you quit and have say 6 months left on your contract, the team you work for may put you on gardening leave. This is effectively a suspension, you still work for the team and collect a paycheck but you just stay home until your contract runs out. This is to prevent you from working for a competitor and taking the latest secrets with you for that period.
This is more fair to the employee than a non-compete because at least in this case you are still getting paid! Your employer has to pay **you** for the privilege of keeping you off the market.
For these reasons many countries are starting to make non-competes straight up illegal, which is good news for a lot of employees with said clauses because they often act like a pair of handcuffs, forcing you to stay for an employer that underpays you or treats you badly, and preventing you from joining a competitor for a better paying job.
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