Source: CoStar —
For most U.S. real estate brokers, job hopping is part of a successful career where executives can negotiate bigger paychecks — and a more important-sounding title — at a new company once they have proven themselves to the industry. But sometimes they have to wait for their noncompete contract to expire, a process regulators are looking at changing.
Real estate brokers can expect to get more protection in switching jobs, allowing them to bring more innovation to the industry, if the Federal Trade Commission’s proposed ban on noncompete clauses in employment contracts takes effect, lawyers and recruiters say. The proposal, unveiled this month, could increase wages by nearly $300 billion per year and expand career opportunities for 30 million U.S. workers, according to the agency.
The FTC’s proposal includes requiring companies to rescind existing noncompete clauses and actively inform workers that those restrictions are no longer in effect. If the proposal is implemented, it has the potential to be a “radical change” that could “unshackle” workers from legal documents an employee often signs without much thought of the legal consequences in real estate and other industries, said Ashish Mahendru, the founder of Houston-based commercial litigation law firm Mahendru PC.
“This would completely upend the industry,” Mahendru told CoStar News.
For most employees, noncompete agreements aren’t negotiated and workers don’t understand their legal rights, said Mahendru, who has decades of experience practicing employment law.
“That shroud of uncertainty and fear is what the FTC wants to eradicate,” Mahendru added. “The FTC wants to open up the economy and open up the ability for employees to be as productive, entrepreneurial or move in the stream of commerce as they want.”
Noncompete contracts, regulated at the state level, are often used by companies to protect valuable proprietary information, which could otherwise fall into the hands of a competitor that hired a rival’s employee. The FTC says that in practice noncompete agreements have led to suppressed wages, hampered innovation and have blocked entrepreneurs from starting new businesses.
But there are obstacles to eliminating noncompete agreements. While the FTC’s proposed ban — if it goes into effect — is seen by some as spurring innovation and creating new businesses in the real estate industry, the initial upending of the current process could eventually be curbed as some companies use other legal maneuvers in place of noncompetes, lawyers say. In addition, the proposed ban is expected to be hard to implement with opposition so strong.
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