Dive Brief:

• Should the Federal Trade Commission’s nationwide ban on noncompete agreements take effect in the fall, 16% of employees that are subject to one will quit and 7% will start a rival business, a survey shows.
• “Overall, two in three employees bound by noncompete agreements feel they missed out” on opportunities because of the restrictions, says Clarify Capital, a small business loan originator that surveyed 500 employees and 500 business executives. 
• Executives think the impact of the ban will be bigger: 24% of employees will switch jobs and 16% will start a rival business. 

Dive Insight:

The FTC voted 3-2 in April to impose a nationwide ban on the use of noncompetes. The agency says the agreements hold down compensation and impede economic growth by discouraging the formation of rival businesses. 

The U.S. Chamber of Commerce sued to stop the ban from taking effect but a federal judge halted the lawsuit and directed the group to join another lawsuit that was the first to file. 

Should the ban take effect, noncompetes will be prohibited going forward and existing agreements must be rescinded, with the exception of some agreements made in connection with the sale of a business. Other types of agreements could also be banned to the extent they function as noncompetes. These other agreements include non-disclosures and non-solicitations. 

About a fifth of the U.S. workforce is bound by noncompetes, according to the FTC. Particularly troubling to the agency is the increased use of the agreements for lower-level employees who, unlike executives, don’t necessarily pose the kind of competitive threat that the agreements are intended to curb. 

In the survey, 61% of employees subject to a noncompete say their earning potential has been affected, with two-thirds saying they’ve lost out on about $10,000 in annual income. Almost 60% say their noncompete has hurt their career mobility and just over half say it keeps them from starting a rival business. About one in five say they’ve done things that would be considered a violation of their agreement. 

Almost 90% say a raise would go a long way in keeping them at their job, and almost two-thirds say a bonus would help. About half say a 4-day work week, flexible work hours, better 401(k) matching and improved health coverage would help. 

Executives’ views tend to be more pessimistic. Not only do they believe higher numbers of employees will jump ship, but they're less likely to think better compensation and benefits will keep employees in place. Only 73% think raises would help and fewer than half think better benefits would.