The FTC estimates about 30 million people, or one in five American workers, from minimum wage earners to CEOs, are bound by noncompetes. It says the policy change could lead to increased wages totaling nearly $300 billion per year by encouraging people to swap jobs freely.
This might get voted down, but y’all should hear the counterpoint. My friend requires new hires to sign a NC that expires after 2 years. It basically says the employee may not work for another company using the same equipment unless they pay him the $3000 it costs him to get them certified. Before he did that, some employees would jump to a competitor shortly after completing the training. Now he’s wondering if he can make the $3000 an employee loan that will be forgiven after 2 years of employment.
And no, he doesn’t do the NC if the new employee was already certified. He just wants to protect his investment in their training.
This change in the law will have consequences in businesses where employees require special certifications or training for a high demand specialty. Will an auto repair shop be willing to train an employee to service EVs if they can’t guarantee the employee will remain with the shop?
If your friend paid a competitive wage with the other company using the same equipment, while also providing an equal or better working environment, he would be able to retain the employees, and find an equilibrium for those moving to and from his competitor.
The only reason he would need a contractual limitation is if he was offering worse wages or a worse working environment.
Counter point, the other company pays better because they save on training costs.
3000 isn’t much when it comes to onboarding costs, so I don’t think that’s why, but imagine if it cost 10k,20k, etc.
For clarity, I’m very much in favor of this ruling. But I also sympathize with the above reply.
You have options like offering a guaranteed raise or bonus
An employer could offer an immediate $15,000 signing bonus to anyone who already has the certification, effectively outsourcing their training costs while pocketing the extra 5k of the 20k true cost
While I sympathize with the potential to get intentionally ripped off for the training class, there’s got to be a better way. I don’t see how you define it well enough to not open it wide for employer scams. Your friend may be honest but what about the fast food place that mandates $3,000 “training” on flipping a burger? You have someone who can’t afford to pay it off so is trapped, but by training that is either unnecessary or currently “free”.
Given the employer has the power and the financial/legal advantage, you have to give this to the employee
I understand there’s a lot of abuse, but for some specialties there just aren’t enough trained workers. This change is going to make employers think hard about things like diesel mechanic certifications and IT certifications. And like my friend, they’ll turn to making workplace loans for the cost.
In the above example, it seems like it would make sense to handle like a sign on bonus. I don’t have a noncompete, but there was like a two timeout that was pro-rated on my sign on bonus. Basically if I jumped ship before the two years was up I would owe something to my previous employer but less the closer I got to the two years. Tuition reimbursement worked in a similar way.
2 years is too long IMHO. 1 year, forgiven in a prorated fashion seems far more palatable.
I work in government and an agreement to work for 2 years after the city pays tuition, license renewals, etc or reimburse the city is pretty standard.