What the FTC ban on noncompetes means for Seattle

A nationwide ban on noncompete agreements might not have as much of an impact in Seattle as other cities, a University of Washington employment expert says, noting there's a high percentage of tech and other workers who may make too much to be affected.

Why it matters: Critics of the agreements say they stifle innovation and wage growth by restricting workers' ability to take new jobs that pay higher wages or offer some other opportunity.

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• The Federal Trade Commission says the nation should see an increase in workers' wages of up to $488 billion over the next decade if the ban goes into effect.

Yes, but: The FTC ruling would allow existing noncompetes with senior executives — people earning more than $151,164 who are in a "policy-making position" — to remain in effect.

• That exception could disproportionately affect Seattle, which has a relatively large number of high income earners, David Tan, an associate professor at the University of Washington Foster School of Business , told Axios.
• Albert Squiers , managing director of the technology practice at Fuel Talent , told GeekWire that the definition of "policy-making position," therefore, could be crucial to Seattle tech workers.

How it works: Noncompetes are clauses in employment contracts that prohibit workers from taking jobs with their employer's competitors.

• They have become more widely used and criticized in recent years for unfairly restraining employees — particularly those at the lower end of the income scale.

Reality check: A lawsuit filed by two powerful business lobby groups one day after the ban was finalized will likely delay it from taking effect — or derail it entirely and test the limits of the FTC's power.

Reproduced from Economic Innovation Group ; Note: Income restrictions refer to states where noncompetes are enforceable depending on an employee's income level. Other restrictions include noncompetes for certain types of workers, duration, etc.; Map: Axios Visuals

Catch up quick: Washington state approved its own limits on noncompete agreements in 2019 that makes them allowable only for employees earning more than $100,000 a year and independent contractors who make $250,000 annually, per GeekWire.

• But many Washington workers who had been making more than $100,000 found that noncompetes hampered their chances of immediately finding new jobs or starting their own companies following rounds of tech layoffs in 2022 and 2023.
• "Employees who are working deep in the weeds of new technologies don't feel they have the ability to leave or start their own companies because of non-competes that could be enforced," Sean Sternback of Seattle-based Cloud Capital Management told Forbes last year .

What we're watching: How this will play out among local tech companies, including Microsoft, which announced in 2022 it would no longer include noncompete clauses in most U.S. employment agreements, and Amazon , which has sued multiple former workers over the last decade.

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