Non-compete agreements have long been a staple in the cleaning industry. Preventing employees from exiting to establish competing businesses or to join rival companies helps to secure both clientele and trade secrets. On Tuesday, April 23rd 2024,  the Federal Trade Commission (FTC) unveiled a significant ruling aimed at banning non-compete agreements. If this ruling goes into effect, it could mean big changes for industries that traditionally rely on such clauses. 

Navigating the Implications

Under the final ruling, the landscape of employment within the cleaning sector is set to become more fluid, granting employees increased freedom to transition between jobs. This change challenges cleaning companies to devise innovative strategies to retain their workforce and safeguard competitive edges. Without the enforcement of non-competes, focus might shift towards enhancing employment benefits, improving job satisfaction, and possibly raising wages to decrease employee turnover.

Moreover, cleaning businesses might increasingly rely on confidentiality and non-solicitation agreements to protect sensitive information, albeit within the confines of the law. These agreements are essential tools in ensuring that while employees are free to move, they do not take proprietary business information with them.

As a quick refresher, here are the main differences between these common types of contract clauses:

  • Non-compete Agreement: A contract restricting an employee from entering into competition with an employer after the employment period is over.
  • Non-disclosure Agreement (NDA): This legal contract prohibits employees from sharing information deemed confidential.
  • Non-solicitation Agreement: Prevents former employees from soliciting clients or colleagues to leave the business for a set period after leaving the company.

What’s Next

Currently, the ruling is set to go into effect 120 days after it is published into the Federal Registry, which hasn’t happened yet. We may see some businesses attempt to contest the ruling, but it’s important to consider the implications if that doesn’t happen.

The broader consequences of this ruling might see a surge in competition as entry barriers diminish and more individuals feel empowered to launch their own ventures. This scenario could stimulate innovation and improve services across the sector, posing both a challenge and an opportunity for existing businesses.

As the industry navigates this transition, cleaning companies must carefully balance the protection of their business interests with the need to adapt to a regulatory environment that favors increased worker mobility. Embracing these changes might not only be a necessity but could also prove beneficial in fostering a more competitive and innovative market landscape.

FTC Non-Compete Clause Final Rule PDF – https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf