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A new survey finds that 23% of employees now constrained by non-compete agreements plan to either switch jobs or start a rival business if the Federal Trade Commission’s ban on non-compete agreements survives legal challenges and takes effect this fall. 

Specifically, 16% of employees already bound by non-competes said they will get new jobs if the ban takes effect and 7% said they will start their own business, according to the survey by Clarify Capital, a New York City small-business lender. 

Employers, on the other hand, are expecting the fallout from the rule to be worse, predicting that 24% of their workers would leave for new jobs and 16% would quit to start their own company if the FTC rule takes effect, the survey found. 

The FTC rule prohibits companies from enforcing most non-compete agreements that prevent employees from working for competitors or from starting their own business. The rule, approved by a 3-2 vote in April, was officially published in the Federal Register this week and is set to take effect Sept. 4, unless it is overturned by the courts.  

The U.S. Chamber of Commerce has filed a lawsuit seeking to stop the ban on non-competes from taking effect, arguing that the FTC has overstepped its legal authority. A U.S. District Court in Texas is expected to hear arguments later this summer. 

The Clarify Capital survey asked 502 employees and 504 business executives about their perceptions of the FTC rule banning non-competes and the impact it would have on their workplace and career. Overall, both employees (72%) and business executives (70%) said they supported the noncompete ban, but support varied by industry, the survey found. 

When workers were asked about the top actions their employers could take to entice them to stay in their current jobs if non-competes are abolished, 88% said higher wages, 61% said bonuses, and 48% said a four-day workweek. Other remedies they identified included flexible work hours (47%), improved 401(k) matching (47%), better health insurance (46%) remote work opportunities (38%), and more paid time off (38%). 

Business executives asked the same question also identified higher wages (73%) and bonuses (53%) as the two top ways to keep workers from leaving. They also mentioned flexible work hours (44%), better health insurance (42%), remote work opportunities (42%), improved 401(k) matching (36%), more PTO (35%), a four-day work week (34%), clarifying career advancement paths (34%) and higher education assistance (24%). 

Other key takeaways from the survey: 

  • Over 1 in 4 business executives (26%) have required new employees to sign a noncompete agreement, with those in manufacturing being the most likely to have done so (61%). 
  • Business executives in education are the most likely to support the noncompete ban (83%), followed by 80% in tech and 80% in retail/distribution. 
  • Business executives in healthcare are the least likely to support the noncompete ban (60%). 
  • Business executives in finance/accounting are the most likely to believe employees at their company will leave for new employment opportunities (37%) or to start a rival business (29%) due to the noncompete ban. 
  • Employees working in manufacturing are the most likely to support the noncompete ban (84%), followed by 78% of tech employees, 76% of retail/distribution employees, 71% of education employees, 68% of healthcare employees and 65% of finance/accounting employees.