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FTC ruling bans noncompetes, impact on equipment rental industry to be determined

By Stephen Elliott

April 28, 2024

U.S. Federal Trade CommissionThe U.S. Federal Trade Commission issued a final rule banning noncompete agreements, but how and if it impacts the equipment rental industry is still to be determined.

The FTC said the ban is protecting the fundamental freedom of workers to change jobs, increase innovation and foster new business formation. The commission vote to approve the issuance of the final rule was 3-2. The final rule will become effective 120 days after publication in the Federal Register, according to the FTC.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said Lina Kahn, FTC chair. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

According to Reuters, lawsuits have already been filed to block the new FTC rule, including a complaint by the U.S. Chamber of Commerce. The challenges are likely to delay the rule’s implementation, which is set to take effect in August.

Josh Nickell, ECP-SM, American Rental Association (ARA) vice president, equipment segment, offered some thoughts on the ruling and its potential impact on employees. On a broader scale, Nickell does not anticipate drastic shifts in the rental industry landscape. He said while the ruling might seem significant, its practical effects on the rental industry are likely to be limited, with the most successful companies continuing to rely on their cultural and operational strengths to attract and retain talent.

“States that have already limited or prohibited noncompetes have shown that the best companies do not rely solely on these agreements to maintain their workforce,” Nickell said. “A positive work environment and fair compensation are more effective at fostering employee retention than restrictive legal measures.

“Companies that succeed in creating a workplace where employees want to be, rather than feel obligated to stay, will continue to thrive,” Nickell continued. “For individuals, this ruling may offer increased professional flexibility. However, the presence of non-disclosure and non-solicitation agreements will likely play a part in limiting the ability to take your customer base to a competing company.”

Nickell said trust and loyalty are paramount in the rental industry and the change might increase the rewards for loyalty.

“Employees should weigh the benefits of potential opportunities against the stability and satisfaction provided by their current roles. Moving too frequently can disrupt customer relationships, which could ultimately hinder long-term professional success.”