“This rule affects every segment of the American economy and in a simple 3-2 vote destroys billions of dollars in value that employers have spent in compensation for a covenant not to compete”.  That quote is part of the message delivered in a National Funeral Directors (NFDA) Special Bulletin on Tuesday by NFDA General Counsel Christopher Farmer.

 

It was part of an NFDA bulletin that you can find here.

 

According to this article from Seeking Alpha on the subject, “The regulator (FTC) voted 3-2 to ban non-compete agreements. Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date”. 

 

In January 2023 the Federal Trade Commission (FTC) made this proposal and on Tuesday evidently made a final ruling.  And, according to the NFDA bulletin, “This is a comprehensive ban on noncompetes with workers in all for-profit businesses in the United States. . . . . Further, employers must provide workers with existing non-competes notice that they are no longer enforceable.” 

 

Again, according to the NFDA bulletin, “Undoubtedly, this rule will be challenged. As the two new members of the Federal Trade Commission noted in their dissents, the FTC only has the power that Congress has given to them, and there is certainly a very strong argument that the FTC has exceeded its Congressionally granted authority in this case.”

 

In a statement from FTC Chair Lina Khan the ruling was defended with these statements, “Noncompete clauses keep wages low, 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.  The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

 

It was also noted in the FTC release that “The FTC estimates that the final rule banning noncompetes will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year”.

 

Finally, the NFDA bulletin makes this statement about non-competes entered into via a business sale, “The final rule does not apply to noncompetes entered into by a person pursuant to a bona fide sale of a business entity. Thus, the final rule does not apply to owners who have sold their funeral homes and are restricted by a noncompete provision as a part of the sale”.

 

Here is the FTC’s press release  from Tuesday April 23, 2024, on the rule banning non-competes.

 

Funeral Director Daily take:  From my point of view there is a whole lot of ramifications to the funeral home ownership industry that could come out of this decision.  Many non-owner funeral directors have been compensated for their loyalty over the years with non-compete financial arrangements.  It appears to me that those employees, in most cases, will no longer be bound by those non-compete agreements.

 

This happens in a time when the historical brick and mortar traditional funeral home and the costs to maintain and operate such are coming under pressures. . . . especially with the growth of direct cremation with no services or services held in off-site locations.

 

I think because of the changes in the consumer’s attitude about death care arrangements we will see more niche death care operations started in all areas of the country. . . . This ruling would give today’s employees the ability to be the entrepreneurers of these new establishments while leaving their current employers with a high-cost traditional operation that would have to compete with what could be lower-cost niche operations now owned by well-known local funeral directors.

 

What comes to mind for me are newer and fresh store-front operations that are growing such as Sparrow in New York City and Exit Here in London.

• Here is the website for Sparrow Funeral Home
• Here is the website for Exit Here

 

An interesting thought — Would the recently noted Professional Golf Association (PGA) “Loyalty Payments” be considered something of a Non-Compete agreement?

Here’s the ESPN article on the news — “Report:  Tiger Woods, Rory McIlroy among big PGA Tour payouts”

 

More news from the world of Death Care:

• Death care sector’s latest innovations.  In the Black (Australia)
• Funeral poverty:  2.8 million over-50’s say they don’t have a plan for a funeral.  IFA Magazine (Great Britain)
• Catholic cemeteries on the front line against secular fear of death.  National Catholic Register
• New-trend undertakers take funerals out of dark corners to celebrate life.  Shine (China)

 

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