April 26th 2024.
According to John Arensmeyer, founder and CEO of the Small Business Majority advocacy group, the recent ruling by the Federal Trade Commission (FTC) to prohibit noncompete agreements is expected to have a significant impact on small businesses, particularly those owned by Black entrepreneurs. In an email to BLACK ENTERPRISE, Arensmeyer shared his take on the ruling and its potential effects.
On April 23, 2024, the FTC voted to block most noncompete agreements, which typically prevent employees from working for competitors or starting their own businesses after leaving a job. While this ruling has been hailed as a win for the U.S. economy, it has also faced backlash from organizations such as the U.S. Chamber of Commerce and the national tax firm Ryan LLC, who have filed lawsuits to challenge the mandate. As a result, the implementation of the ban may be delayed due to legal battles.
Arensmeyer noted that approximately 30 million American workers are currently bound by noncompete clauses, according to the FTC. He also highlighted the impact of these agreements on small business growth, citing research that shows 33% of small business owners have been unable to hire new employees due to noncompete agreements.
This is especially significant for the Small Business Majority, as two-thirds of their 85,000+ members are BIPOC, many of whom are Black-owned businesses. These businesses not only contribute to the economy, but also serve as a means of wealth-building for their owners. In fact, it has been reported that Black entrepreneurs have a median net worth over ten times higher than Black individuals who do not own businesses.
While there is no data on how many aspiring Black entrepreneurs have been hindered by noncompete agreements, Arensmeyer believes that this ruling will have a positive impact on the growth of Black-owned businesses. He shared that the FTC estimates the U.S. economy will see an increase of over 8,500 new businesses each year once the rule is implemented. Additionally, the ruling is expected to lead to higher wages, reduced healthcare costs, and increased innovation.
Arensmeyer also addressed the disproportionate impact of noncompete clauses on marginalized groups, particularly Black workers. He explained that due to systemic racism, Black workers often have limited job opportunities and may be more likely to accept a job with a restrictive noncompete clause. This decision by the FTC will level the playing field for small businesses and remove barriers that have hindered the growth of Black entrepreneurship.
In conclusion, Arensmeyer believes that this ruling is a step in the right direction towards promoting small business growth and supporting the entrepreneurial dreams of individuals, especially those from marginalized communities. He hopes that this decision will pave the way for a more inclusive and fair business landscape.
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