Non-Competes: A Non-Starter, Says FTC

Non-Competes: A Non-Starter, Says FTC

The FTC’s rule is set to take effect in about four months, unless it is blocked by legal challenges.

As you read ShopOwner, whether it is in print or online, one thing – hopefully – comes across clearly: our mission is to help your shop be more successful.

Sometimes, that is evident through solid marketing advice, updated technical resources or inspirational messages about other successful shop owners who deal with challenges in creative ways. Typically, each issue of our magazine contains all three – and then some.

This month, you’ll find the second installment in our new series, It’s Time. Intended to help you navigate the maze of steps involved in succession planning, our series answers the question of when it’s best to start planning to keep your business viable long into the future. In short, it’s never too early to start preparing because you never know what may happen.

In fact, change and uncertainty were made quite evident on the day I interviewed Karen Schleifer, an attorney dedicated to helping businesses in Ohio start, grow and thrive. As we discussed a myriad of legal issues shop owners need to be aware of (read more starting on page 22 of this issue), including the importance of having the right people in the right places at a modern repair shop, the subject turned to recruitment and retention.

Karen pointed out that shops in some states utilize non-compete clauses in employee contracts to prevent workers from leaving for a competitor’s bays, or at least limit when and where they can move. State and Federal laws vary, she explained, so shop owners need to be aware of what’s legal in their state.

Well, at the exact time that Karen and I were talking, the Federal Trade Commission cleared things up in a dramatic way.

On April 23, the FTC voted to ban nearly all non-compete clauses in employment agreements that prevent workers from joining other businesses or launching their own. The Commission says that non-competes are a “widespread and often exploitative practice that suppresses wages, hampers innovation and blocks entrepreneurs from starting new businesses. By stopping this practice, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.”

For workers, the opportunities are clear. For bosses – especially in an industry like ours where there’s already a shortage of technicians, those opportunities may be harder to focus on.

“Non-compete clauses keep wages low, suppress new ideas and rob the American economy of dynamism,” FTC Chair Lina Khan said. “We heard from employees who, because of non-competes, were stuck in abusive workplaces.”

Of course, as part of our aforementioned mission to help boost your shop’s success, ShopOwner frequently shares stories of employer/employee teamwork. As Maclane Reeser, owner of Maclane’s Automotive in Downingtown, PA, says in our cover profile on page 26, “People don’t quit jobs, people quit managers.” In other words, it’s not always cash that’s king.

The FTC’s rule is set to take effect in about four months, unless it is blocked by legal challenges. In the meantime, is it time to consider how you’re keeping your team together?

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