Local professional, expert weigh in on FTC rule to ban noncompete agreements
BENTONVILLE, Ark. (KNWA/KFTA) — A local professional and a business expert give their take on the Federal Trade Commission’s rule that bans noncompete agreements that will allow workers to work for their competition.
Lynn Hill, owner of Yoga Story in Downtown Bentonville and Downtown Rogers, says it makes sense to have a noncompete for those in senior positions for companies because they know confidential information, but it doesn’t make sense to have it for independent contractors such as those in the fitness industry.
Before becoming a yoga studio owner and teacher, Hill worked in executive compensation at Walmart.
With the help of those in corporate governance, they put together noncompete clauses for the senior positions in the company.
“If they were to go to another company that is in the same type of market as Walmart, they could share details about Walmart to that company at a very high senior level. So you could see why those folks in that position would need a noncompete,” Hill said.
The Federal Trade Commission says about 30 million workers in the U.S. have a noncompete.
“It’s not just your top-level CEOs where you might expect that a little bit more, but it’s workers in fast food places, it’s yoga instructors, it’s plumbers, it’s electricians, so it’s all over. And, it really puts a damper on people’s ability to move jobs and to start their own businesses,” said Jeff Cooperstein, senior research associate with the Center for Business and Economic Research at the Sam M. Walton College of Business at the University Of Arkansas.
The FTC issued the rule that bans noncompete clauses on Tuesday.
It says this will promote competition, protect the freedom of workers, and create new businesses.
“The Federal Trade Commission voted three to two to put an end to noncompete agreements for everybody except work executives making over $151,000. But no new noncompetes can be put into place even for that group of folks. So what it means is that you’re now able to compete within your industry,” Cooperstein said.
Cooperstein thinks eliminating noncompete agreements will be beneficial.
“It might mean higher wages for workers. It also might mean more new businesses getting started in an industry and more new businesses means more competition, more competition act to control prices,” Cooperstein said.
The U.S. Chamber of Commerce says it will file a lawsuit to block the rule.
It says the FTC is overstepping its authority and the two Republican appointees to the FTC voted against the proposal for the same reason.
Hill says at her studio, they do not have noncompetes and she allows teachers to teach at other studios because it’s “fair and ethical.”
“I have teachers, very good very professional teachers who do this full time, and so I know that they’re not going to be able to make a full-time living wage just teaching three or four classes at my studio. So that’s why I was like, ‘I’m not going to enforce a non-compete,’” Hill said. “I want them to be able to make a living off of this because of the gifts that they give in teaching yoga.”
She says with a noncompete, their work is being devalued.
“We shouldn’t be undervaluing or inhibiting their ability to earn a living performing that service,” Hill said.
If you have a noncompete agreement, Hill says it’s important for you to know your rights and understand what the laws are.
The ban on the noncompete is expected to take effect in August.
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