FTC Bans Non-Competes: What Does It Mean For Self-Storage?

“It’s now easier for millions of workers to quit!” writes CBS News. “Workers prepare to switch jobs!” wails the Wall Street Journal. These and statements like them have been making headlines over the last 48 hours, following the nationwide ban on new non-compete agreements, which Federal regulators enacted on Tuesday. 

To reach the 3-to-2 vote in favor of the ban, the antitrust and consumer protection agency heard from thousands of people who said they had been harmed by non-competes, and who felt the agreements trampled on people’s economic liberty. 

Behind the Ban

The FTC’s action comes more than two years after President Biden directed the agency to curtail the unfair use of non-competes. When arguing to banish these workplace agreements, the FTC presented real-life examples of how they have hurt workers in the past.

• In one case, a single father resigned from his $11 an hour security guard job when he could no longer afford child care. Months later, he found a bank security job that was set to pay him $15 an hour; however, the bank terminated his employment after receiving a letter from the man's previous employer stating he had signed a two-year non-compete.
• In another case, a factory worker had his pay cut during the 2008 financial crisis. A rival company offered him a better job and a higher salary, but his non-compete blocked him from taking it, resulting in a three-year legal battle that wiped out his savings.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once non-competes are banned,” said FTC Chair Lina M. Khan. 

Despite these cases and Khan’s sentiments, within hours of the vote the U.S. Chamber of Commerce, which advocates for U.S. corporations and businesses, vowed to sue to block the rule, calling it an “unnecessary and unlawful overreach.” It further stated that the ban would undermine American businesses' ability to remain competitive. 

Employers who use non-competes also argued that they are needed to protect trade secrets or other confidential information employees might learn in the course of their jobs. In response, the FTC stated that corporations concerned about protecting their intellectual assets could still use confidentiality agreements and trade secret laws, and don't need to resort to non-compete agreements.

A Self Storage Perspective

Although self storage facilities typically have few employees, and some are completely unmanned, is there reason for owners to be concerned over the non-compete ban?

“First off, there will be opposition from business groups who will seek to challenge the rule,” says legal expert Scott Zucker, a partner at Weissmann Zucker Euster + Katz, P.C. “So, the ruling needs to survive these legal challenges before anything can happen, and that may take a while.”

He adds that if it does survive, it could give senior executives, managers, and non-owner employees more freedom to pursue a new job, start a new business, or bring a new idea to market. But should self-storage companies expect a mass exodus of employees that some of the headlines warned of? “Absolutely not,” concludes Zucker.

Studies back up his statement. A study from 2023 authored by the Federal Reserve, whose interests lie in supporting a healthy economy for both businesses and U.S. households, reveals that workers with non-competes are seven percent more likely to apply for new jobs than those without them. These results are in contrast to the notion that non-competes tend to reduce workers’ job-search activity and career prospects.

Zucker is also quick to point out that the ruling would exclude some types of non-competes. “A non-compete created as part of a property acquisition, which would stop the sellers from re-starting their businesses under another name and competing with the buyers, would still be enforceable,” he assures.

“Again, it is a ruling only from the Federal Trade Commission,” reminds Zucker. “It is not a law created by the legislature.”

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Brad Hadfield is a news writer for MSM and manages the company website.