While the rule’s ultimate form and enforcement may yet face legal challenges, the decision signals a significant shift in employer-employee dynamics, and heralds a new era where organizations can no longer rely on these restrictive clauses as a means of protecting their intellectual property (IP) and sensitive information.
Historically, noncompete agreements have been tools to prevent employees from taking their skills and knowledge to competitors or starting similar businesses after leaving their employer. The FTC’s ruling will drastically alter this practice, emphasizing the value of a more dynamic workforce and increased employee mobility. Commenting on the ruling, FTC Chair Lina M. Khan reflected that noncompete clauses not only keep wages low, but they also “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”.
Whether the Final Rule is challenged or successfully comes into effect later this year, the impact on HR teams across the country will be immediate and significant as many organizations ready themselves for the upheaval to their current policies. Updating the employee agreements of the estimated 30 million people – that’s one in five American workers – with noncompete clauses in their existing contracts represents a massive undertaking.
The FTC has included model language for communicating the changes to employees to ease the transition. However, for HR professionals, it doesn’t resolve the intent behind these clauses, particularly concerning the critical issue of IP protection. Where companies can no longer rely solely on outdated noncompete clauses, HR professionals need to ensure new protections are put in place and agreed upon by existing employees. Many teams will be required to create, share and chase for the signature on new agreements – contracts, NDAs or nonsolicit agreements, for example – for almost every existing employee, particularly given the small number of exceptions to the ruling and who they represent, such as senior executives who make up less than 0.75% of workers.
Beyond addressing existing contracts, the FTC ruling necessitates a proactive approach to future HR documentation. Many standard templates for HR documents, from employment contracts and severance agreements to offer letters, will need to be updated. This will entail removing outdated noncompete clauses and potentially adding new language to reflect alternative measures for safeguarding company information.
Together, this requirement for new HR document creation presents a substantial workload for HR teams, particularly those preparing each document manually.
The sheer number of new HR documents for employees, not to mention the process for the review and approval of each, represents a huge task for HR managers and one that should not be embarked upon without automated document creation. Each hour spent manually preparing individual documents is an hour the HR team is not delivering value back to the business, which in large enterprises could represent tens of thousands of hours.
aconso’s Genius Document Creation, for example, empowers HR managers to create branded master templates, which can then generate personalized documents for large groups of employees simultaneously. This is thanks to integrations with all of the leading employee management software, including SAP SuccessFactors, Workday and more, where the relevant personal information for the document – such as their name and address – can be automatically drawn from the employee personnel file.
The end-to-end process management also eliminates the time-consuming process of managing the review and signature on each document. Integrations with digital signature platforms, like DocuSign or Adobe Acrobat Sign, further streamline the individual approval workflows to ensure documents move through the approval pipeline with ease and speed.
This tried and tested approach to automated HR document creation is already supporting enterprises across the globe, such as Munich Airport, where Tobias Hermann in HR Services commented “Today, we update our documents more or less at the touch of a button.”
✓ Ideal for Employee Agreements
✓ Secure Digital Signatures
✓ Efficiency and Personalization of Documents
✓ SAP SuccessFactors and Workday Integration