Changes to restrictive clauses could reshape employee development, leaving L&D concerned about potential budget cuts. Marie Unger delves into the potential impacts of evolving non-compete agreements on workforce investment and growth 

Non-competes – a type of ‘restrictive clause’ in employees’ contracts to stop them working for a competitor for a specified period after leaving their current organisation – are in the news. In the wake of the United States Federal Trade Commission’s ruling to eliminate non-compete agreements for most roles, the US Chamber of Commerce has indicated that the decision will negatively affect employers’ willingness to invest in employee development.  

While the ruling is being challenged, these sentiments have generated more immediate concerns for many in the talent development space, who are wondering if their functions will soon experience budget cuts.  

The short answer is yes and no. 

Executives who want their businesses to thrive in today’s economy and into the future will continue to invest in workforce development despite changes in non-compete agreements 

Before making significant changes to their operations, most executives will wait until there is a final ruling in the courts, which will take months at minimum. If non-compete agreements are banned, there is likely to be a mix of responses. 

Scarcity mindset vs growth mindset 

Some executives, especially those who operate with a scarcity mindset, may choose to decrease their learning budgets. In these instances, the concern from management typically stems from the idea that non-compete agreements enhance employee retention rates. Without some clause to keep staff on board, business leaders may be concerned about the perceived losses they will experience if they invest in a team member’s growth, only for them to take those talents to a competitor. 

This concern is short-sighted in nature because it only considers the expense of learning, not the possibilities that it brings for productivity and engagement.  

The case for continued investment  

Executives who want their businesses to thrive in today’s economy and into the future will continue to invest in workforce development despite changes in non-compete agreements. A few primary drivers are contributing to this attitude.  

Artificial intelligence growth 

With the rise of artificial intelligence (AI), businesses cannot overlook the training required to keep up with the evolution. With technological advancements, the World Economic Forum estimates that 44% of workers’ skills will be disrupted by 2028. In the past, it was common to try to hire to address skills gaps; however, that strategy is becoming increasingly difficult to implement. 
 
77% of HR professionals are struggling to find candidates due to talent shortages and skills gaps. In the absence of being able to hire to meet changing demands, business leaders will need to invest in staff development to support internal mobility and build the capabilities they need in-house.  

Attracting and retaining talent 

Many executives acknowledge that growth opportunities are vital to attracting and retaining personnel. 76% of workers are looking for opportunities to expand their careers, so forward-thinking employers recognise the value of learning for their employer brand. 
 
Additionally, 94% of employees state that training is something that would convince them to stay at their company. Investing in professional development can minimise turnover and save money. While estimates range, replacing a team member typically costs six to nine months of their annual salary. In comparison, the average annual training investment per learner in the US ranged between $954 and $1,207 in the past two years.   

Boosting productivity 

Leaders who adopt a long-term approach understand that employee growth supports productivity. Companies with formal training programmes yield 218% higher income per worker than those without. They also have a 24% higher profit margin. Considering the costs to replace personnel and the influence of learning on the bottom line, the numbers speak for themselves. 

Talent development professionals who find themselves working with leaders who recognise the value of employee growth are unlikely to see a decrease in their budgets as a result of the recent rulings. 

Those professionals who find themselves working with leaders less committed to employee development can begin shifting perspectives by helping executives understand the opportunity cost of not investing in the workforce.  

Strategies to shift perspectives 

• Demonstrate the business impact of learning by examining the productivity gains realised from training utilisation. It can also be useful to provide metrics connecting growth initiatives and employee engagement or internal mobility.  
• Encourage leaders to consider the impact of organisational skills gaps in succession planning to invite a long-term view.  
• Poll staff to understand the importance they place on training. Identifying connections between learning opportunities and measures such as tenure and motivation can help reinforce the value of these programmes for any organisation. 

By demonstrating how learning influences the bottom line and long-term business goals, talent professionals can navigate these headwinds to advance their initiatives no matter what changes come with this latest challenge to non-compete clauses. 

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Marie Unger is CEO of Emergenetics International