Earlier this week, the Federal Trade Commission (FTC) voted to issue a final ruling that would prohibit the enforcement of a majority of noncompete agreements. Per the draft text, the FTC said that it is a “violation of federal antitrust laws for employers to enter into noncompetes with workers on or after the rule’s effective date.” The final rule would take effect 120 days from the date of publication in the Federal Register.
Since the 3-2 vote in favor of the ruling took place, the U.S. Chamber of Commerce asked a federal district court in Texas to stop the FTC from enforcing the ban, on the grounds that the governing body had exceeded its authority.
As reported by Legal Dive, the Chamber’s complaint stated that, “Even if the Commission had any authority to issue substantive regulations proscribing ‘unfair methods of competition,’ the Noncompete Rule would still be unlawful because noncompete agreements are not categorically unlawful under Section 5” of the FTC Act. Unfair trade practices are prohibited under Section 5.
Additionally, while the ban’s primary goal is to give employees freedom of movement in their careers, it may pose a risk to deal-making, especially when key personnel are a part of the acquisition. Private equity investors in particular may be more hesitant to buy a company if it does not have assurances that executive and key talent is not going to remain.
“Retention of managerial and executive talent is part of the going concern value of the business ... The executive team is part of what the buyer is buying,” Matt Prewitt of ArentFox Schiff told Legal Dive.
But what do CFOs think about the new noncompete rules? In partnership with the CFO Leadership Council’s CFO Network, a private LinkedIn group exclusively for finance chiefs and executives, CFO conducted two polls to get a sense of the potential impact. There are two general sides to the analysis — how CFOs think the rule will impact themselves, and how they think it will impact their key talent.
CFO career trajectory
CFO’s ability to retain top finance talent
Poll results indicate that, while finance chiefs are aware there may be some impact on how both they and their top talent pursue goals, the new ruling does not appear to be a significant risk.
CFOs do not believe a lack of a noncompete will impact where they want to go and what they want to do in their careers and are largely not concerned about the ruling’s impact on retaining key talent.