On January 5, 2023, the U.S. Federal Trade Commission (“FTC”) issued a Notice of Proposed Rulemaking (“NPRM”), seeking comments on a proposed rule that would effectively ban the use of non-compete agreements, nationwide. In a typical non-compete agreement, employees agree not to work for a competing employer, or start a competing business, within a certain geographic area and period of time after their employment ends. The FTC is taking the position that such agreements are, on their face, anti-competitive and hurt workers and, accordingly, want to prevent all employers from entering into non-compete agreements with any “workers,” paid or unpaid – including both employees and independent contractors, as well as to require employers to rescind any existing non-compete agreements with workers and “actively” inform them that the agreements are no longer in effect, with very limited exceptions. The FTC is seeking public comment on various issues related to the proposed rule over a 60-day period. The rule would require full compliance within 180 days after the publication of a final rule.

Although the proposed rule, if finalized, is destined to receive vigorous legal challenges from numerous stakeholders, all employers should consult with counsel and take immediate action to prepare for the possibility that this rule will go into effect later this year. In addition, as recent FTC enforcement actions announced this week have made clear, the FTC is taking the position that the use of non-compete agreements in various industries violates the federal antitrust laws – whether or not the new rule goes into effect – and has put employers on notice that it intends to vigorously enforce those laws. This latest push by the Agency grows out of the Biden Administration’s belief that lack of labor market competition harms workers, arguing that employers’ ability to restrict worker mobility can decrease wages, reduce benefits, and worsen working conditions. Promoting fair competition in labor markets is a “key priority” for the FTC. In addition, numerous states have recently enacted extensive limitations on using non-compete agreements, and three states, California, North Dakota, and Oklahoma, outright ban them.

What you need to know about the proposed rule:  

The proposed rule defines a “non-compete clause” as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.” The FTC would apply a “functional test” as to whether a contract provision is a “de facto non-compete clause” because it has the effect of prohibiting such employment. Although this would be a particularly fact-specific analysis, the proposed rule provides examples of potentially “de facto” non-compete clauses, including:

• Overly broad non-disclosure (confidentiality) agreements that “effectively preclude the worker from working in the same field after the conclusion of the worker’s employment with the employer;” and
• Agreements that require an employee to repay the employer’s unreasonable training costs if the worker’s employment ends within a specified time period.

For purposes of the rule, the FTC defines a “worker” as a person who works, whether paid or unpaid, for an employer, including “without limitation, an employee, individual classified as an independent contractor, extern, intern, volunteer, apprentice, or sole proprietor who provides a service to a client or customer.” The term “worker” does not include a franchisee in the context of a franchisee-franchisor relationship; however, the term worker “includes a natural person who works for the franchisee or franchisor.”

The proposed rule would declare it to be an “unfair method of competition” for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause “where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.”

The rule would not simply “void” such agreements; to the contrary, the proposed rule requires employers to actively “rescind” any non-compete clause no later than 180 days after finalization of the rule, and provide notice to the worker that the worker’s non-compete clause is no longer in effect and may not be enforced against the worker. The employer must notify the worker in “individualized communication” within 45 days of rescinding the non-compete clause. The notice must be sent to current and former employees who may be covered by such an agreement. The proposed rule provides (non-mandatory) “model language” for the required notices, which can serve as a “safe harbor” against enforcement. 

The requirements of the proposed rule would not apply to a non-compete clause that is entered into by a person who is selling a business entity or otherwise disposing of all of the person’s ownership interest in the business entity, or by a person who is selling all or substantially all of a business entity’s operating assets, “when the person restricted by the non-compete clause is a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause.” Non-compete clauses covered by this exception would remain subject to Federal antitrust law and all other applicable laws.

The proposed federal rule would supersede any state statute, regulation, order, or interpretation to the extent that such statute, regulation, order, or interpretation is inconsistent, unless such statute, regulation, order, or interpretation affords any worker greater protections.

As for comments, the FTC is particularly interested in public comment on:

• Whether franchisees should be covered by the rule;
• Whether senior executives should be exempted from the rule, or subject to a rebuttable presumption rather than a ban; and 
• Whether low- and high-wage workers should be treated differently under the rule.

What should employers do now?

There is no reason at this point to panic given the anticipated time period between the 60-day public comment period, the unknown time period thereafter for any proposed rule to become final, the uncertain outcome of the language in any final rule, and the 180-day grace period thereafter for employers to become compliant with any final rule. As such, there is no reason to immediately stop using such restrictive covenant agreements in your business, provided such agreements are otherwise reasonable and enforceable under applicable state law. However, given the position the FTC has taken on this issue, as well as the increasing scrutiny covering such agreements around the country, it may be prudent to evaluate their utility and what steps may be needed to take in the event some variation of the proposed rule takes effect in the future.

If you want to understand why some companies have a toxic culture, underperform relative to their potential, and eventually collapse — look no further than the quality of their leadership teams. Whereas competent leaders cause high levels of trust, engagement, and productivity, incompetent ones result in anxious, alienated workers who practice counterproductive work behaviors and spread toxicity throughout the firm. Consider that the economic impact of avoiding a toxic worker is two times higher than that of hiring a star performer.

Incompetent leaders are the main reason for low levels of employee engagement, and the prevalent high levels of passive job-seeking and self-employment.

There are too many incompetent individuals in leadership positions — in large part because businesses tend to promote people on the basis of charisma, confidence, inaction, and even narcissism.

Instead, companies should be putting people in charge who demonstrate competence, humility, and integrity. If you’re responsible for assessing leadership candidates, you should work on your ability to distinguish between confidence, competence, and experience. Remember that overconfidence is a natural result of privilege.

Fortunately, you can use scientifically valid assessments to measure the traits you want (or don’t want) in your leaders. You can ask company leaders, including emerging leaders, to take self-assessments, and then measure their responses against their leadership style, performance, and effectiveness. The resulting data will help identify patterns that characterize good and bad leaders at your company.

Of course, this practice will take time and effort, and many organizations won’t want to invest those resources. But vetting candidates for leadership roles will pay enormous dividends down the line.

Uncertainty is unavoidable. As an executive, you need to be prepared to lead your organization through murky waters, but doing so requires getting in the right mindset. Here are my six tips to help you shift your perspective:

1. Embrace the discomfort of not knowing. Move from a “know-it-all” to a “learn-it-all” mindset. You don’t need to have all the answers you just need to ask the right questions.
   
   
2. Distinguish between “complicated” and “complex” issues. They require different solutions.
   
   
3. Let go of perfectionism. Instead, aim for progress, expect mistakes, and recognize that you have the ability to continually course correct as needed.
   
   
4. Resist the urge to oversimplify and come to quick conclusions. Take a disciplined approach to understand both the complexity of the situation and your own biases.
   
   
5. Don’t go it alone. Connect with your peers who have their own set of experiences and perspectives to draw from.
   
   
6. Zoom out. Taking a broad, systemic view of the issues at hand can reveal unexamined assumptions that would otherwise be invisible.

Most likely your Corporate Culture has suffered during the last few years. While a lot of companies have tried to keep connected by finding fun ways to gather virtually, nothing really can replace the face-to-face water cooler conversations of years past. When the pandemic began, we thought we were biding time until we could return to in-person work. Now, it’s broadly accepted that a return to in-office work really means hybrid work where some employees will work remotely for the foreseeable future.

On the one hand, that’s great news for inclusion and flexibility for employees as well as for companies like mine that build the tools that enable our work-from-anywhere lives. On the other hand, as an executive overseeing distributed employees who are working hard on our next big thing (and the next and the next), I’m viscerally aware that nothing rallies the troops more than when we rally each other in person.

No video meeting can replace the energy in a room full of people brainstorming to come up with innovative solutions together! Even though that same synergy may feel out of reach across virtual time and space, there are plenty of ways in which business leaders can foster culture, celebrate people, and strengthen connections to make the corporate culture better today than ever. Here are my three ideas for how to level up our attention to culture in this distributed, virtual world.

1. Build a sense of importance during this time of constant change.
   
   The “Great Resignation” is real, and it’s affecting every company. As fresh talent joins a company, they bring different experiences, perspectives, and ways of doing things with them, too, creating a mélange of old ways and new ways. Being open-minded to new ideas will help both companies and people to advance. Insisting that “we’ve always done it this way” might block opportunities for new and better ways of doing things. It’s good to shake things up from time to time! In any growth-minded organization, the only thing constant should be changed.
   
   It is best if change feels like an intentional, participatory event rather than something that staff is inevitably forced to accept. One way to make all employees feel like they are included in conversations about change is to include them in decisions that affect them. That seems like a no-brainer, but we all have been on the receiving end of a list of deliverables from a meeting that we didn’t attend. That feels siloed, disconnected and even a bit inconsiderate. Somehow, even in virtual space, we all still have too many meetings, and it’s all the more important for attention still to be paid to who is (and isn’t) around the table. Especially with new staff and new management, the only way we’re all going to get to know each other is by intentional, considered interactions. Now is the time to include, not exclude.
   
   
2. Foster diversity and inclusion in both old and new ways.
   
   Speaking of inclusion, who’s around your meeting table? Diversity and inclusion aren’t just about gender and race, which remain important, of course. But the diversity of experience, representation across hierarchies, and consideration of cross-departmental impacts all matter, too.
   
   Where culture breaks down is when it isn’t inclusive—and broadly inclusive at that. Having the right mix of experience at the table when tackling a problem enables newer staff to learn and longer-term staff to teach, and vice versa. Count me among those who have learned a great deal from even the greenest new staff. I can do that because we’re at the same table.
   
   There needs to be room for staff to be able to join meetings that they’re curious about, too, ones that touch on their purviews even tangentially. Imagine inviting—not requiring—staff to attend some meetings by sharing that “your voice is welcome at the table.” That’s not just inclusive; it’s flattering. There is a valuable, positive cultural impact to gain from helping all players on the team to see that they are part of shaping the future of the company. After all, it’s their future, too.|
   
   
3. Empower employees to drive the outcomes they want.
   
   With new staff joining frequently, I’m noticing more and more comments from existing staff like, “We tried that before, and it didn’t work.” I push back, asking questions like, “Why do you think it didn’t work?” and “What haven’t you tried?” My favorite is “How do you think we can do things differently so that the desired outcome is attained?”
   
   I don’t want my staff to take no for an answer (well, not necessarily), and I don’t want them simply to seek approval. I want them to pave the way toward their (our) goals. Empowering staff to see things through, to try to figure things out differently, and to engage in innovative thinking encourages ownership and creates new synergies. Their success depends on their ability to make things happen in partnership with others in the company. Instead of an employee carrying out a function, they’re stakeholders carrying out a shared mission. That’s what’s at the heart of any great corporate culture: dedication to a shared purpose.
   
   Even though we’re not often together around a real table anymore, by building a sense of importance, fostering inclusion, and empowering each other—plus by working together as much as possible in new and varied ways—we can become more tight-knit and more supportive of each other in virtual space. Feeling part of a team fosters the highest sense of belonging, purpose, and loyalty. This is the way forward with less attrition and more intention, which makes any company’s culture more vibrant and desirable for those already there and for those who have yet to arrive.

We all know networking is important to business and developing more meaningful, long-term relationships bring benefits beyond networking.

The Mindset of a Long-Term Relationship

When you meet people, you will know long-term, you take more time to listen, give a bit more effort, and go out of your way to find commonalities.
When you develop a long-term relationship mindset, you create more meaningful connections. “Treat each employee relationship as if it’s going to be permanent,” says Marty Fukuda of Entrepreneur. “This is the difference between a summer fling mentality and a committed bond. If you believe you will be working in the same office with an individual for the next several decades, you probably will take more care in crafting a meaningful relationship.”

Long-Term Relationships Build Trust by Having the Other’s Best Interests

If you think of relationships as long-term, your behavior may change. For example, you will want to look out for the other person’s best interests, knowing you will interact in the future. Practically, this may mean investing more time in training someone. You may listen to remember a hometown or the name of someone’s spouse, know you will follow up on this connection in the future.
In contrast, a short-term relationship mindset may mean falsely influencing someone to buy something not needed to make a quick sale or having a cursory conversation out of mere obligation.
Playing the “long game” with someone is a good business strategy. “To be successful in sales you have to play the long game,” says advertising entrepreneur Chelann Watt. “It’s about understanding how your avatar thinks and the moves they make. Because at the end of the day, money is a trust currency. You don’t just hand over your hard-earned money to strangers. There needs to be a level of trust built between you and your client so that when the time comes for them to be making those big decisions, you are the clear, trusted choice.”

Meaningful Social Connection Leads to Personal Happiness

Besides networking, developing meaningful, long-term relationships has health and happiness benefits.

For her bestseller, The Happiness Project, author Gretchen Rubin spent a year of her life researching what makes people happy. And hands-down, across the globe, one of her biggest findings is the importance of meaningful social connection. “Studies show that if you have five or more friends with whom to discuss an important matter, you’re far more likely to describe yourself as ‘very happy,’ says Rubin. “Not only does having strong relationships make it far more likely that you take joy in life, but studies show that it also lengthens life (incredibly, even more than stopping smoking), boosts immunity, and cuts the risk of depression.”

Here are a few practical tips for building long-term relationships:
Spend quality time with people by showing up to lunches and social activities
Offer support to other people in times of adversity. Go to a party, a wedding, or a funeral, visit a newborn baby or stop by someone’s desk.

Go to groups-connecting over shared interests builds connection.
Consider remembering birthdays or using social media to praise someone’s work, send personalized holiday cards, pick up the phone or send a thoughtful text.

So much of our personal and professional lives are measured by the happiness we experience in our relationships. Our network is only as valuable as the time we put into these relationships.