Last week, the Federal Trade Commission announced a rule that would block employers from including noncompete provisions in employment contracts. This means that workers who want to leave their jobs for another working environment or earning opportunity are now able to forge ahead, without fear of legal action from their former employers. The move, by some calculations, could result in a $300 billion wage increase for workers.
Employers have historically turned to noncompetes to reduce turnover and keep workers from fleeing to competition, as demonstrated by a study from the Economic Policy Institute that found 30% of U.S. employers had all of their employees sign noncompetes, and nearly 50% of employers had some of their employees enter noncompete agreements. Of course, for workers with intimate knowledge of trade secrets like proprietary technology or convoluted recipes, it would make sense that employers should on a case-by-case basis cement confidentiality provisions.
However, the vast majority of workers should have the chance to take skills accumulated over a long career and move on to better opportunities for themselves and their families. There is a multitude of reasons that workers may want to move on and up: a toxic boss, a cross-country move, an unsatisfactory salary, a workplace scandal, or needing more flexibility after having a child. Whether someone is writing code or cutting hair, they shouldn’t have to be indentured to the same employer for years, without the ability to move on as external factors change the conditions of their lives.
In many ways, the FTC’s rule mirrors the cultural desires of a workforce that does not want to be locked into one workplace forever, and it speaks to the needs of those who want to move into more independent, flexible, or lucrative forms of work. Millennials and Gen Zers have a reputation for job-hopping and are far more likely to change jobs frequently than boomers, according to LinkedIn data from early 2022. That same study found that some 25% of Gen Zers say they hope or plan to leave their employers within the following six months. This cohort will make up a third of U.S. labor by 2030. And according to a study by freelance platform Upwork, a record 60 million Americans performed freelance work in the past 12 months, representing 39% of the U.S. workforce.
Employers may still bristle at workers who want to contribute their skills to the competition, but this is a shortsighted attitude. Employees who are forced to stay at a workplace against their will could end up being a greater productivity drain for the company. Looked at from another angle, wouldn’t an employer want to recruit a talented worker from a rival who is mistreated, underpaid, or dissatisfied, and looking to move on to a better opportunity?
This shift also pushes workplaces and managers to treat their workers with more respect, with an understanding that their workers could have the autonomy to move on to something better. If the employee is a low performer, the employer should not care that they are pursuing rival work; if they are a high performer, that employer should do everything in their power to maintain that competitive labor advantage.
In our work at Lioness, a storytelling platform that often works with whistleblowers, we have seen workers petrified that noncompete clauses could limit them from ever working in their industry again. One example involved noncompetes at a yoga studio, where yoga teachers were technically prohibited from working at other yoga studios despite facing bullying, harassment, and unpaid wages at their own studio. When workplaces do this, they are essentially telling individuals they must face legal ruin if they ever bring their skills elsewhere.
In an era of “quiet quitting” and resignations, it’s clear that workers are demanding novel ways to improve their earnings and quality of life. Eliminating noncompete clauses is a win-win for the workers who want more freedom and upward mobility, and the employers who want a greater pool of talent to choose from.
Ariella Steinhorn and Amber Scorah are partners at Lioness.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
More must-read commentary published by Fortune:
- Will the U.S. and Europe slide into recession in 2023? Here’s how to look out when economic outlooks don’t
- Biggest CEO successes and setbacks: 2022’s triumphs and 2023’s challenges
- I have 10 minutes to clean a plane before passengers board. Here’s why the holidays’ air travel chaos was entirely avoidable
- The next era of work will be about skills–not pedigree. Here’s how employers are changing the way they judge potential, according to LinkedIn and Jobs for the Future
