FTC ruling on non-compete agreements will help black-owned businesses

The variety of black-owned businesses is prone to be small grow with fresh federal trade Commission (FTC) a ruling prohibiting the conclusion of non-competition agreements.

That’s the view of John Arensmeyer, founder and CEO of the advocacy group Small Business Majority (SBM). He assured BLACK ENTERPRISES with an e-mail comment on the brand new judgment.

Essentially, on April 23, 2024, the FTC voted to dam most non-compete agreements. These arrangements currently prevent employees from working for competitors or starting a competing company after leaving their job.

At the identical time, the FTC’s decision has already been made get some opposition. On April 23, 2024, the U.S. Chamber of Commerce and national tax firm Ryan LLC filed lawsuits in federal court protesting the mandate, reported. Therefore, legal disputes may delay the implementation of the ban.

Arensmeyer identified that, in keeping with the FTC, roughly 30 million American employees are covered by non-compete clauses.

Arensmeyer said the ban on non-compete agreements is a victory for the U.S. economy since it will help fuel small business growth. He said SMB research shows that 33% of small business owners they couldn’t hire an worker as a result of the non-competition agreement.

The ante is potentially high. About two-thirds of SBM’s greater than 85,000 business owners are BIPOC, a lot of them Black-owned. Moreover, owning a black business could be a source of wealth. Black entrepreneurs allegedly generate greater than ten times the typical net value than Black people without businesses.

He said it is not known exactly how that number breaks down demographically, but SBM is aware that Black entrepreneurship has grown rapidly lately. He reported that the FTC estimates that after the implementation of this rule, greater than 8,500 recent businesses will appear within the American economy annually. The federal agency also said the ruling could help raise employees’ wages, lower health care costs and spur innovation

“Given the growth of entrepreneurship in the Black community, it is likely that even more Black people would start businesses if they were not held back by factors such as non-compete clauses,” Arensmeyer says.

He added that SBM doesn’t know exactly what number of aspiring black entrepreneurs failed to start out small businesses. However, SBM’s own scientific opinion survey shows that just about 50% of small business owners reported that a non-compete agreement prevented them from starting or growing their very own business.

“We have also heard anecdotally and through our research from a significant number of people of color whose entrepreneurial dreams have not been realized or have been delayed due to non-compete agreements.”

He says the FTC has found that “the enforceability of a strict non-compete clause has very different effects on different demographic groups. He stressed that this included “little or no impact on men and a much greater impact on women and black men and girls.”

He explained that employment opportunities for Black employees are sometimes more limited as a result of systemic racism. This means they’re more likely to just accept a job covered by a restrictive non-compete clause than other employees who could have more job opportunities.

He says the FTC’s decision will level the playing field for small businesses in a way that will help them grow without threatening the health of existing businesses.