FTC Bans Non Competes
Thoughts on this. Pretty crazy. Do you guys think this is a positive or negative!
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Depends on how you are affected by headcount turnover
I think this is net-net bad given certain HF employers will lean more into using bonus deferrals / bonus clawbacks as retention tools which may create more friction costs for analysts who get fired / want to leave without something lined up.
Will be interesting for a lot of medical / business services roll ups that rely on non-competes to avoid employees acquired businesses from immediately going out and competing against them as well.
2 things. 1) Only enforceable in 120 days and will likely be fought. 2) If you’re considered Sr Executive, this doesn’t apply to you (Sr Exec is defined as making 150k annually), so im guessing most buyside will still have non competes.
Can’t they not issue new non competes to senior execs though
Yeah, can enforce to current execs but once it’s passed, I remember reading, cannot issue new ones on execs as well.
$150k and 'makes policy', I wouldn't be too sure that second condition will be met for every mid-level person in finance
If you read the proposed FTC rule here, you'll see that the job duties test for someone being an exempted senior executive (discussed around p267 and stated on p562-3) is conservative and seems unlikely to cover garden-variety PMs, traders, etc., as long as they aren't also the CEO or perhaps CIO of the entire firm.
The rule is that someone is in a policy-making position if they are an officer with policy-making authority for an entire business entity. Officer means the president, CEO, treasurer, comptroller, etc., and policy-making authority means final authority to make decisions that control significant aspects of the whole business, and specifically not those who just advise or influence such decisions, or who have final authority but only for a sub-part of the business.
The FTC's commentary points out that this is modeled on a similar SEC rule (SEC Rule 3b-7), so perhaps that increases the chances that lawyers and policymakers will know how to interpret it, and that it will withstand future pushback or legal challenges.
So it is not effective immediately? I haven’t seen that 120 days stipulation.
It’s in the exact article from the the FTC.
“The final rule will become effective 120 days after publication in the Federal Register.”
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