Goldstein said the more narrow the noncompete agreement, the more likely it will hold up in a court currently; meaning Coca-Cola, hypothetically, can enforce a noncompete clause preventing its employees from going directly to work for rival PepsiCo. A company typically cannot get away with preventing employees from leaving to work for any other company in their category, she said.
Brands have tried though.
The CMO said they’ve seen broad noncompetes where companies have tried suppressing employees from going to another company in the same industry. The candidate may feel forced to agree to something like that if they need a job, they said.
“I’ve always been able to work with a company and come to an agreement,” the CMO said. “But it’s all about leverage. If the candidate has a job and is moving to a new opportunity, they have leverage. If they’ve been out of a job for a few months, sometimes they don’t.”
Two ad agency executives said they’ve encountered clients trying to force the agency’s senior people to agree not to work with a competitor for a certain amount of time if they left the partnering agency for another. They said those are more rare.
It is common for agencies to agree to not service two competing brands. What a brand deems a competitor will vary.
“It’s hard for me to say, ‘hey agency you can’t do business with any other QSRs,’” the CMO said. “I’m not going to deprive you guys of making money.”
Goldstein said the FTC’s proposed rule doesn’t seem to extend to non-solicitations or nondisclosures, as of yet, and likely wouldn’t affect agreements between agencies and brands around client conflicts.
“But the devil will be in the details,” she said. “We’ll have to see more of the details after this is finalized.”