The FTC Ban on Non-Competes – From Life Science Recruiters’ Perspective

In a landmark decision, the Federal Trade Commission (FTC) has voted 3-2 to approve the issuance of a final rule that could reshape the landscape of employment contracts across the United States. This rule, if upheld, promises significant changes with far-reaching implications for both employees and employers alike. Let's delve into the numbers to understand the potential impact of this ban. 

8,500 New Startups Within a Year 

One of the most striking predictions accompanying the FTC's decision is the projection of over 8,500 new startups emerging within a year of the ban taking effect. This surge in entrepreneurial activity could inject fresh innovation and competition into various industries, fostering economic growth and job creation. 

2.7% Per Year Increase in New Business Formation 

Coupled with the rise in startups, the ban on non-competes is expected to fuel a 2.7% per year increase in new business formation. This influx of new enterprises could diversify markets, enhance consumer choice, and drive economic dynamism across regions. 

Earnings Boost for the Average Worker 

The ban on non-competes isn't just about entrepreneurship—it's about empowering workers. By freeing employees from restrictive contractual agreements, the average worker stands to gain an additional $524 per year in earnings. This increase in income could improve financial stability and enhance overall economic well-being. 

Lower Health Care Costs 

In addition to boosting earnings, the ban on non-competes could yield substantial savings in healthcare costs. Projections suggest that healthcare expenses could decrease by up to $194 billion over the next decade, easing financial burdens on individuals and families. 

Increased Innovation and Patent Activity 

The removal of non-compete clauses could unlock a wave of innovation, leading to an estimated 17,000 to 29,000 more patents filed each year for the next decade. This surge in patent activity could drive technological advancement and spur growth in key sectors of the economy. 

Impact on Workers Subject to Non-Competes 

Currently, an estimated 30 million workers—nearly one in five Americans—are subject to non-compete agreements. If the ban stays in effect, these individuals will gain greater mobility and freedom in pursuing career opportunities, leading to a more dynamic and competitive labor market. 

Retention of Certain Non-Competes 

While the ban aims to dismantle most non-compete agreements, it's important to note that a small fraction—0.75% of existing non-competes—will remain in effect. These include agreements for senior executives earning over $151,164 annually who play a pivotal role in making policy decisions within their organizations. 

Overlap with Non-Disclosure Agreements (NDAs) 

Researchers estimate that over 95% of workers bound by non-compete agreements also have non-disclosure agreements (NDAs) in place. While the ban on non-competes may enhance mobility for workers, the prevalence of NDAs underscores the importance of safeguarding proprietary information and trade secrets in a competitive business landscape. 

So, what does this mean for hiring in the Life Sciences? 

• A ban on non-competes will change the hiring game, making both the talent market larger, and the hiring process more competitive as direct competitors will now be on the table for candidates who previously were restricted. 

• We may also see a rise in employment contracts, especially on the commercial side, where employers may leverage new methods and structures to retain talent.  

• And what does it mean for talent attraction? Employers will be forced by market pressure to continue investing in talent retention, increased brand awareness, company culture, and work-life balance to retain employees as compared to contractual obligations. 

• The importance of recruiting will become even more critical. As the ban on non-competes may result in a decreased wage gap and increased availability of opportunities at competitors, recruiting the right talent that aligns with your culture, and vision, and is “here to stay” will be as important as ever.