May 08, 2024
Page 9
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o piNioN
A Win for Black Entrepreneurship: Is the
New FTC Ban Good for Black Businesses?
In what has since created
shockwaves across the nation,
the Federal Trade Commission
(FTC) voted 3-2 for banning
noncompete agreements, which
goes into effect 120 days after the
rule is officially published in the
Federal Register. This decision
will undoubtedly have significant
impact on both employers and
employees alike, but what about
black entrepreneurs?
The FTC defines a non-com-
pete clause as, “a term or condi-
tion of employment that prohibits
a worker from, penalizes a work-
er for, or functions to prevent a
worker from (1) seeking or ac-
cepting work in the United States
with a different person where
such work would begin after the
conclusion of the employment
that includes the term or condi-
tion; or (2) operating a business
in the United States after the con-
clusion of the employment that
includes the term or condition.”
Historically,
non-competes
have been used to restrict em-
ployees from working in the
same industry after leaving their
former employer. Though the
intention is to protect the intel-
lectual property of businesses,
non-competes have often neg-
atively affected competition in
product and service markets, es-
pecially with Black workers.
If written properly, most
non-competes have outlined spe-
cific restrictions of a current or
former worker, who can be their
employer, where they can work
for said employer, and for how
long they aren’t allowed to work
for an employer, which can be
unduly burdensome. Imagine be-
Taalib Saber, attorney and owner of The Saber Firm
ing told who to work for and who
not to work for. That basically is
a non-compete. Those who have
signed non-competes and wish
to increase their salaries, will
either have to accept where they
are or change industries and pos-
sibly, locations. These are all un-
necessary hassles that restrict a
competitive market and perpetu-
ate wage suppression.
I have reviewed contractual
agreements of several Black cli-
ents who I have worked with in a
variety of areas, from tech to en-
tertainment. Many of my clients
desired to venture out or hang
up their proverbial “shingle,”
signaling the start of their own
business, but have been deterred
by these non-compete clauses.
Approximately 18 percent of
the workforce, which is about
30 million people, is covered by
non-compete agreements. In the
Black community, there’s a say-
ing that goes, “If a white person
has a cold, then a black person
has pneumonia.” What this essen-
tially means is that if the majority
of Americans are suffering from
a particular thing, that thing al-
ready has, currently is, or will be
suffered much more by Black peo-
ple. Here, if many Americans are
experiencing the effects of wage
suppression and restrictions in the
market, then the Black commu-
nity feels it worse. Add in Black
workers who want to start their
journey to entrepreneurship and
it becomes an almost impossible
task to accomplish.
FTC estimates that the impact
of banning non-competes could
increase worker pay by $300 bil-
lion and it can lead to 8,500 more
new businesses each year. For
Black entrepreneurs, the elimi-
nation of non-competes can now
open the door to new innovations,
creativity, and fairer competition
in the marketplace. This ban
can help business owners attract
top talent, as there would be no
restrictions on the mobility of
skilled workers; thus, strengthen-
ing their businesses and enhanc-
ing their competitiveness.
With that stated, there will be
several legal challenges to the
implementation of the FTC’s
non-compete ban. Within 24
hours of the vote being pub-
lished, both the United States
(US) Chamber of Commerce,
the world’s largest business or-
ganization, and the Business
Roundtable, an association of
chief executive officers of Amer-
ica's leading companies, filed suit
against the federal agency.
In a statement released an-
nouncing the lawsuit, the US
Chamber of Commerce declares,
“[t]he FTC contends that by using
regulation they can simply declare
common business practices to be
‘unfair methods of competition’
and thus illegal. This is despite the
fact that noncompete agreements
have been around longer than the
110-year-old FTC and until now
no one has suggested that they are
illegal.” It goes on to state, “[i]f
the FTC can regulate noncompete
agreements, then they can decide
to regulate or even ban any other
business practice. All without a
vote from Congress.”
I believe that many more busi-
nesses, organizations, associa-
tions, and groups will file law-
suits and lobby against, what they
believe, is an overreach by the
Federal Trade Commission on
governing business transactions.
Furthermore, if any of the federal
courts who hear the cases decide
to grant a stay or a preliminary
injunction on the ruling, the ef-
fective date could be postponed.
Then, if the cases are appealed
thereafter, the ruling would be de-
layed for many more months.
So while this non-compete ban
could take some time to go into
effect, black entrepreneurs should
start positioning themselves to
take advantage of it.