By Tony Misura
In 2023, Minnesota became the fourth State to ban Non-Compete Agreements (NCAs). California, North Dakota, and Oklahoma round out the group. Other states have tightened the rules: Maryland limited non-competes to people making more than three times the State’s minimum wage of $15 per hour. Georgia eliminated the courts’ ability to “Blue Pencil” or change non-compete agreements that do not define geography. New York looks to be the next State to take the breath out of non-competes.
NCAs are slowly becoming obsolete through state law. If President Biden’s administration has its way, most NCAs will be illegal under federal law. The proposed ban wouldn’t apply when a person is selling a business.
The Federal Trade Commission’s plan to bar NCAs argues that non-competes unfairly limit prospects for one in five American workers or 30 million people. The FTC highlights lower-level workers, such as sandwich makers, hairdressers, and security guards, reflecting how ridiculous the application of the law has become.
The term “non-compete” should indicate what NCAs lead to: Less competitive companies and industries. You can see this evidence at Harvard Yard, where I’m writing this today. The Massachusetts Institute of Technology is just 18 blocks down the Charles River in Boston, and similar talent pours out of nearby universities like Tufts, Boston U., Radcliffe, and Boston College every spring. It’s hard to imagine a city better equipped to be Silicon headquarters of the U.S. than Boston. Yet California has Silicon Valley, and not because of the sunshine. California’s ban on non-competes has created the best competitive environment for the tech industry.
Who do non-competes help? No one except dying companies— those without a competitive value proposition to keep and grow their customers. Those same companies struggle to compete for the best talent.
So, what are the top 3 steps to be prepared?
1. Improve your Talent Value Proposition Brand.
2. Extend your sustainable customer competitive advantage.
3. Repeat 1 and 2.
Key data point: Builders First Source no longer uses non-competes for their Outside Sales talent, or field operations leaders.
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