Retaining high-performing employees has long been a major concern for many organizations, and the current competitive job market only makes employers more anxious not to lose some of their best people to their competitors.
Figuring out ways to attract and retain top employees has led to many metaphorically golden incentives – whether handcuffs, handshakes, hellos or parachutes. However, companies have also resorted to contractual requirements that benefit them but offer little to employees.
For example, non-compete clauses are implemented ostensibly to prevent people from moving to a rival after an employer has invested in training or to preserve trade secrets. However, they are sometimes applied in absurd circumstances to staff who have no opportunity to negotiate. For example, sandwich maker Jimmy John̵7;s notoriously required employees to sign a non-compete that effectively prevented them from moving to make sandwiches at a rival.
Additionally, non-competes are often included in employment agreements without much thought to their necessity or enforceability.
However, non-contenders may be on the way out. As we report on page 9, the Federal Trade Commission has proposed a ban on the agreements in employment contracts, saying they block workers from freely changing jobs and deprive them of higher wages and better working conditions. Legal challenges are expected, but the move at least puts their use in the spotlight.
Rather than non-competes, the insurance industry often uses non-solicitation or confidentiality clauses in employment contracts, which are less restrictive but still lead to many disputes, especially among brokers. Lawsuits are spreading alleging brokers did things like download client lists before leaving to join a competitor or start a rival store. The suits are often decided by the new employers who seem to see the payments as a cost to win new business.
In some countries, such as the UK, employers use long notice periods as departing employees serve out of the office on “garden leave”. Such an approach could help employers in other jurisdictions, but the agreements appear cumbersome.
Not all of the various restrictions seem to take customer preferences into account. In an industry that relies so heavily on relationships, why wouldn’t a customer stick with a person he or she has trusted for years if they switch companies? Conversely, if they value the support, products and market influence of a brokerage firm, there is nothing stopping them from staying and starting a relationship with a new account manager.
Freedom of movement also has the advantage of fostering innovation as ideas and skills spread.
There are obviously circumstances where poaching companies receive benefits they should pay for, but unvarnished restrictions that prevent employees from working where they want to work cannot be good for the industry in the long run.