How Would an FTC Non-Compete Ban Affect the Real Estate Industry?

The fight for talent at the top of the commercial real estate industry is a fierce and sometimes litigious battle. Turnover can be high among brokers as they switch from firm to firm in a game of musical chairs. One broker once told me that all the top commercial real estate firms are pretty much the same, which gave me the impression that most brokers think of themselves as essentially free agents that use the company brand while continuing to climb higher.

The one thing that has helped brokerages like JLL and CBRE in this competitive environment is non-compete clauses, which restrict employees from benefitting rival brokerages by switching jobs, usually for a defined period or within a specific geographic location. When brokers do change jobs, legal battles sometimes ensue. For example, Cushman & Wakefield sued two former capital markets brokers last October after they left for JLL. Cushman claimed a breach of a five-year employment contract signed by Mike McDonald and Jonathan Napper in October 2018. Cushman was granted a temporary restraining order against the employees and is seeking monetary relief of up to $1 million.

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The brokers’ contracts came with non-compete clauses, and Cushman & Wakefield claims they took five other brokers and two executives to JLL with them, along with confidential business information and several clients. It was a big L for Cushman, who claimed they suffered several canceled deals because of the move.

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