A recent legal decision could signal the ultimate demise of the FTC’s final rule banning most noncompete clauses. A biotech talent expert discusses how that affects biopharma job searches.
Opposition to the Federal Trade Commission’s final rule that bans nearly all new noncompete clauses has resulted in a roadblock that could lead to the ban—which makes it easier to switch jobs—never going into effect. However, the uncertainty surrounding its fate shouldn’t affect biopharma job searches, according to Carina Clingman, founder and CEO of Recruitomics Consulting, which specializes in talent acquisition and talent strategy for startup biotechs.
“In this climate, if you need a job, you’re on the job market,” she told BioSpace.
In fact, Clingman noted she’s heard little about the ban from job candidates in comparison to how much she heard about the Massachusetts Noncompete Agreement Act, which passed in 2018, significantly restricting the use of noncompetes.
“I think that’s just a mark of how stressed everybody is about everything else in biotech, because I’m hearing a ton of other things and other complaints—other worries, other fears—and that’s just not one of them, which is really surprising to me,” she said.
Those fears include concern about the job market.
“It’s kind of a fraught time,” Clingman said. “I think people are starting to settle down a little bit because we are seeing more jobs opening up, and we are seeing a little bit more funding. The climate’s slightly better this year than it was last year. But people are just very anxious.”
Why the Final Rule May Not Go Into Effect
While there was immediate opposition to the FTC’s final rule after its issue, there’s increased uncertainty it will go into effect because of a July 3 decision from Judge Ada Brown of the U.S. District Court for the Northern District of Texas. Brown partially blocked the rule by postponing when the commission can enforce it for a group of plaintiffs suing the FTC. While the ban is set to take effect nationwide on Sept. 4, that date won’t apply to Ryan LLC, a tax services firm in Dallas that filed the lawsuit, and several groups that joined the suit, including the U.S. Chamber of Commerce.
Furthermore, Brown wrote in her decision that the court intends to rule on the merits of the lawsuit on or before Aug. 30. She noted the plaintiffs are likely to succeed on those merits.
In its lawsuit, Ryan asserted that the FTC’s actions were unlawful in part because it acted without statutory authority. Brown agreed, stating in her ruling that “the FTC lacks substantive rulemaking authority with respect to unfair methods of competition.” She also noted there’s a substantial likelihood that the FTC’s final rule is unreasonably overbroad and imposes a one-size-fits-all approach.
How the FTC’s Final Rule Would Work
The FTC’s final rule covers businesses in various industries, although the commission’s compliance guide notes that some employers, such as banks and federal credit unions, are outside its jurisdiction and aren’t subject to the rule. The rule also doesn’t apply to noncompetes between a buyer and seller of a business.
If the ban goes into effect Sept. 4, on that date, companies can no longer enter into new noncompetes with employees and can only enforce existing noncompetes for senior executives. Senior executives are defined as those earning more than $151,164 annually who are in a policymaking position, such as a president or CEO. Businesses will need to notify all other workers that their noncompetes are unenforceable.
The FTC has provided model language for those notices.
What Biopharma Professionals Should Do Now
Given the FTC’s final rule could get struck down, and as a general practice, biopharma professionals should pay attention to what they agree to when they join a company, according to Clingman. This can make it easier to pursue other opportunities later.
“You should always understand fully your employment agreement,” Clingman said. “That just allows you to have peace of mind if you do want to make a change that you’re not going to run into any issues.”
Clingman also shared that it’s OK to bring your employment contract to a prospective employer’s recruiter so they can have the company’s legal team review it. That way, she said, legal can determine if there’ll be any hiring issues, although there usually aren’t any.
“In most cases, the argument can be made that one individual, especially below a C-suite level, doesn’t know enough to be able to really steal secrets or materially impact the business,” Clingman said, adding that this approach supports the spirit of noncompete laws. “Protect business, but allow people the freedom to move.”
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