Noncompete agreements are labor contracts which prevent workers from leaving for a competitor or starting a competing business for months or years after their employment, often within a certain geographic area. In January 2023, The Federal Trade Commission proposed plans to prohibit non-compete clauses for workers, in almost all contexts. The FTC’s issuance of the rule and a Notice of Proposed Rulemaking (“NPRM”) on non-compete clauses is a significant step, confirming the FTC’s desire to aggressively tackle issues affecting workers as part of its intense focus on competition in labor markets. The proposed rule aims to implement sweeping nationwide changes to an area of law currently regulated at the state level. 

     In sustainable energy, where noncompetition lawsuits are common, these efforts could promote innovation and competitiveness throughout the industry and would have monumental impacts on talent acquisition. “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said FTC Chair Lina M. Khan. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”

Here are the key pros and cons of such a ban:

Pros:

• Promote the mobility of skilled professionals and engineers, facilitating the transfer of knowledge and expertise.
• Attract top talent, reducing the risk of skilled professionals being restricted from working for preferred employers.
• Increased wages due to increased competition for top talent.
• Encourages entrepreneurship and removes barriers for new renewable energy start ups, as they struggle to attract the necessary talent to compete with established players. 

Cons:

• Potentially results in the loss of valuable information and intellectual property, as employees who leave a company may be free to share confidential information with competitors.
• May harm companies that rely on noncompete agreements to protect their unique technologies and processes and negatively impact investment into research and development. 
• May make it harder for domestic companies to compete with international competitors, who may not be subject to the same restrictions.

     The removal of noncompete agreements would almost certainly have a positive impact on talent acqusition. By allowing renewable energy professionals to move freely between companies and take on new roles, companies will compete for the best talent, driving innovation, and increasing the pace of growth in a time critical industry. For example, in California, where noncompete agreements are illegal, the state has become a hub for innovation and entrepreneurship in the renewable energy sector. 

     In conclusion, the removal of noncompete agreements in the renewable energy industry may help to create a more dynamic and competitive industry, drive innovation and growth, and attract and retain top talent. Over the coming months, the FTC is seeking public comment as the costs and benefits of such a ban are weighed carefully. Stay tuned to the talisman advisory partners LinkedIn page for developing news.

For questions on non-competes and clean energy talent acquisition, reach out to Annie Yang, Clean Energy Recruitment Consultant.

https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-proposes-rule-ban-noncompete-clauses-which-hurt-workers-harm-competition