Earlier this week, the Fair Trade Commission (FTC) made headlines when it announced new regulations banning the use of noncompete agreements by US businesses. “Noncompetes” restrict employees from working for competitors or starting their own businesses in the same industry as their current employer.
Some companies have relied on these agreements as a way to protect intellectual property and retain talent. Critics argue that noncompetes stifle innovation, limit employees' career mobility, and hinder competition within industries. When the FTC shared the proposed regulation for public comment in January 2023, it received 26,000 comments from workers and business leaders. Over 25,000 of those messages were in support.
Business leaders in highly competitive industries might feel caught off guard. But HR teams know that the most effective safeguard against losing talent isn't a policy at all — it's fostering a culture of engagement and loyalty.
While noncompetes are already illegal in California and a few other states, HR teams across the rest of the US may soon have their first rodeo. While it hasn’t gone into effect yet, and is likely to be contested by the US Chamber of Commerce, here are a few reasons why a federal ban on noncompetes is good news for people teams, and how to prepare.
1. It’s a call to reinvest in engagement.
Even in this era of efficiency dominated by cost-cutting and layoffs, HR leaders have never lost sight of the power of engagement.
In fact, HR leaders have ranked employee engagement as their highest priority in every edition of the State of People Strategy Report, first published in 2020. Only in 2024 did performance rise to the top of the list, and it’s still tied with engagement.
Rather than relying on legal constraints to shape the workplace, organizations can focus on cultivating an environment where employees feel valued, respected, and invested in the company's success. When employees believe in the company's mission and feel that their contributions are recognized and rewarded, they are more likely to remain committed and loyal. Put another way, rolling back noncompetes can be a signal for organizations to reinvest in engagement.
In practice, staying on top of sentiment means doubling down on engagement and pulse surveys. Tools like Lattice Engagement empower teams to collect feedback, surface AI-powered insights, and help you implement programs that improve retention and productivity. For a refresher on the most important engagement and performance metrics, download our Performance and Engagement Metrics Cheat Sheet.
2. Career growth is a must-have.
Growth isn’t just a pillar of your retention strategy, it’s a prerequisite for mental wellbeing. In 2023, an American Psychological Association workforce study found that 91% of US workers believe it’s important to have on-the-job learning and growth opportunities. The US Surgeon General’s report on workplace mental health even considers “opportunity for growth” essential to worker mental health, alongside other factors like connection, work-life harmony, and more.
Companies that prioritize the professional growth and development of their employees are better positioned to retain top talent. A 2022 McKinsey report on talent pools backs that up, noting that “lack of career development and advancement” was the most common driver for voluntary departures. Offering training programs, mentorship opportunities, and clear pathways for advancement not only enhances employees' skills and competencies but also demonstrates a genuine commitment to their success.
It’s never been a better time to formalize individual development plans, career tracks, competency matrices, and other employee development best practices. Tools like Lattice Grow make it easier to implement the above and put employees in the driver’s seat of their career growth. For more guidance on how to get started, read Lattice’s Ultimate Guide to Employee Development.
3. Your total rewards need a gut check.
Noncompete agreements were never a good excuse to hold back on equitable or transparent pay. But with the new FTC guidance, it’s time for people leaders to educate the rest of the C-Suite on the importance of total rewards as a retention driver.
Recognizing and rewarding employees for their contributions reinforces their sense of value, and reduces the likelihood of them seeking opportunities elsewhere. But employees also want to know they’re being paid fairly and competitively.
Transparency around pay can help people leaders explain how employees are being paid and why — something to keep in mind as average raises are reportedly on the decline. Plus, Lattice’s 2024 State of People Strategy Report also uncovered that when pay takes a hit, engagement and retention do, too.
Higher pay isn’t likely in the cards at most organizations right now, but equity, benchmarking reports, and pay transparency are all part of HR’s powerful hand. And when the C-suite is committed to compensation transparency, Lattice found that employee engagement is significantly higher (72% vs. 39%). That’s hard to ignore when transparency is arguably free.
Tools like Lattice Compensation give teams the ability to retain talent through more transparent pay strategies. Compensation benchmarking specifically makes it easier for your business to understand whether you offer competitive pay that meets or beats expectations, something your old non-compete could never do. To find out how to get started with benchmarking, read our free compensation benchmarking workbook.
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Dubious legal policies don’t make for an effective retention tool — but you knew that already. It takes a holistic investment in your entire people strategy, from engagement to total rewards, to win employee hearts and minds while helping them do their best work. In other words, employee loyalty is something earned.
Lattice’s people platform makes it easier for HR leaders and managers to retain their highest-performing employees. Whether it’s keeping tabs on employee sentiment in real-time or making it easier to offer fair pay, the Lattice people platform delivers business impact when your organization needs it most. Schedule a call to see how our software makes talent your competitive edge.
