One of Wall Street’s favorite employee leverage tactics — non-compete agreements — is facing a major threat, and there could be far-reaching implications for how the financial industry does business.
The Federal Trade Commission is aiming to ban non-competes, claiming they create an unfair method of competition and thereby violate the Federal Trade Commission Act. It’s unclear what the final rule — expected in April — would look like, but based on a broad-based proposal floated last year, it would upend a major way Wall Street does business.
Not surprisingly, Wall Street is crying foul. “The near-categorical prohibition on non-compete clauses will hurt competition and the economy,” SIFMA, a trade organization for the securities industry, wrote in a comment letter — one of the nearly 27,000 comments the FTC received on its proposal. SIFMA’s board includes executives from most major financial firms including JPMorgan Chase, Morgan Stanley, Bank of America, Citigroup, and Goldman Sachs.
A national ban on non-competes would ripple across the entire economy, as can be judged by the number of major firms that hold board seats at an intellectual property trade group that submitted a comment letter arguing against the FTC approval, including Google, Apple, Pfizer, Exxon Mobil, General Electric, Procter & Gamble, General Mills and Nike. An analysis by the Economic Policy Institute in 2019 found that almost half of employers nationwide have some employees on non-competes. While difficult to provide a precise number, EPI’s survey work estimated between 27% to 46% of all private sector workers being subject to some form of a non-compete.
But it’s also clear that Wall Street firms are under particular attention for the practice. Industry interests were among the opponents to a New York bill, recently vetoed by Governor Kathy Hochul, that would have banned all non-compete agreements in the state. California, where many of the tech giants are based, already has strong…
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