This week, the US Federal Trade Commission issued a sweeping ruling that severely curtails the use of noncompete agreements, dealing a major blow to what has become a key way many fashion companies retain talent.

Initially, noncompete clauses, which bar former employees from working for a rival for a set period, were reserved for the fashion industry’s highest-level hires, such as creative directors and senior executives with “unique skills” and access to proprietary information, said Elizabeth Kurpis, a New York-based fashion lawyer.

However, over time, the use of noncompetes began to expand. Fashion began extending these restrictions to less senior employees who pose “minimal to no competitive risk,” according to Kurpis. That mimicked a trend seen in many industries – famously, sandwich makers at the fast-food chain Jimmy Johns were bound by noncompetes up until the restaurant agreed to end the practice as part of settlement in cases filed by attorney generals in New York and Illinois in 2016. (It’s rare for fashion store employees to be subject to them, recruiters and employment attorneys say.)

Still, rather than being used to protect company’s trade secrets and other creative properties, noncompete agreements became “a retention tool,” meant to keep employees at all levels from seeking out new work, said Caroline Pill, partner at executive search consultancy Heidrick & Struggles in London.

Critics say that broader usage can suppress wages and hinder career growth. Noncompetes have generated pushback from employees, as well as scrutiny from regulators and lawmakers. Before the FTC’s ruling, around 30 states had laws limiting noncompetes based on factors like salary, industry and duration of employment. California outright bans them.

Here, BoF explains how the ban would affect fashion companies and employees.

What did the FTC do?

The FTC this week issued a “final rule” barring companies from making new noncompete agreements or enforcing existing ones for all workers. The rule won’t void existing noncompete agreements for senior executives (which the FTC says accounts for less than 1 percent of all workers) in “policy-making positions” making at least $151,164 a year.

The rule is expected to take effect in August, or 120 days after it’s published in the Federal Register, a process that could be delayed amid legal blowback from business groups and individual companies. In the days since the ruling, the regulatory agency has already been hit with at least two lawsuits, including one filed by the US Chamber of Commerce this week challenging the agency’s authority to impose such a ban.

For its part, the FTC estimates its new ban would free up career opportunities for roughly 30 million workers in the US who are subject to noncompetes.

In some ways, the rule is catching up to gradual changes in the corporate and legal landscapes; many noncompetes exist purely on paper, and would be difficult, if not impossible, to enforce legally.

The tight post-pandemic labour market has also given employees more power to push back against noncompete clauses. Employers also worry about being perceived as impeding career growth if their employment contracts are overly restrictive.

How common are noncompete agreements in fashion and how do they work?

These agreements have long been a standard practice embedded in contracts at fashion houses and luxury conglomerates, as well as at mass-market retailers and athletic brands, according to Kurpis.

In the athletic space, where brands like Nike, Adidas and Under Armour rely heavily on proprietary innovations (such as Nike’s “flyease” and Adidas’ “primacool” technology in some sneaker designs) and maintain top-secret celebrity and professional athlete contracts and endorsements, keeping executives bound to noncompete agreements (and similar nondisclosure agreements or NDAs) are integral to their business operations, Kurpis said.

Typically, these agreements don’t outright forbid individuals from ever joining a rival company. Instead, they mandate a break between employers, usually lasting from three months to a year.

At luxury brands, that period is crucial for creative directors and executives “so that you’re not going to a competitor knowing what’s coming down the runway,” said Paula Reid, president of the executive search firm Reid & Co.

Though rare, there are instances where noncompetes have benefited fashion designers.

In some cases, an employer may agree to provide compensation during this cooling off period. In 2016, Hedi Slimane successfully sued Kering, hoping to have his noncompete enforced — arguing that he was owed $13 million after leaving Saint Laurent as long as he didn’t work at another label for a set period). But such accommodations are not guaranteed, and are less likely to be available to mid-level or junior workers.

How would the ban affect fashion’s workforce?

For workers in mid level positions and below, the noncompete ban could open up their career prospects and allow them to pursue opportunities — including higher wages, more attractive job titles and a more amenable working environment — that noncompetes (even when not actively enforced) may have prevented, Reid said.

The existence of a noncompete alone had long been enough to prevent many fashion workers from pursuing employment at rival companies where their skills and passions are most likely to be a fit.

“People would sometimes say ‘these noncompetes aren’t going to be enforced,’” Reid said. “But, the problem is that every time someone looks for another job, accepts an offer or gives notice, they’re holding their breath.”

For companies, the very insinuation that someone may have signed a noncompete clause is often enough to nix a job offer or take an employee out of the running for even an interview, Pill said.

How can companies adjust to the ban?

The FTC outlined several alternatives it said employers can use to help protect sensitive or proprietary information. Among them are trade secret laws and non-disclosure agreements. Roughly 95 percent of workers in the US with a noncompete already have an NDA, the FTC said.

It’s important to note that the FTC’s noncompete ban would only apply to individuals classified as “workers” or employees of a company in the US. In other words, noncompetes will still be in effect, at least for now, in certain sectors of the fashion industry such as manufacturing and distribution deals, Kurpis said. For example, a factory may be prohibited from producing competing products with the company it currently manufactures for, both during their collaboration and after their partnership ends, she said.

Eventually, the US ruling could have an impact on how Europe “considers their noncompete clauses,” Pill said.

“Obviously, every country is different and some countries are more favourable to the employees or the employers depending where you are, but it’s a welcome change for sure,” she said.

In its comments on the ban, the FTC said it believed the ruling would encourage companies to compete to retain workers on the merits of their working conditions.

“This is a good thing … that the onus comes on employers to know that they’re challenging and empowering and developing their talent, and that they continue to grow and they don’t have to go someplace else to do it,” Reid said.

The European Union’s push to use regulatory pressure to force fashion brands to better manage their environmental and social impact got a boost this week, as the European Parliament rushed to approve a flurry of new rules ahead of June elections that could see the bloc swing to the right of the political spectrum.

In a marathon final session before the vote, legislators greenlit regulations that will make big brands more accountable for what happens in their supply chain, ban products made with forced labour and set new environmental standards for the design and disposal of fashion products.

Exactly what regulations got signed off this week?

Due Diligence

Big businesses operating in Europe will be required to ensure their supply chains are not linked to labour abuses or environmental destruction under a landmark due diligence rule that almost fell apart earlier this year.

Companies with more than 1,000 employees and a net worldwide turnover of more than 450 million ($481 million) will need to audit suppliers and logistics partners from 2029, taking action to prevent or address any malpractice. Larger businesses will need to comply even sooner.

Penalties for failure to comply with the regulation could amount to as much as five percent of net worldwide turnover, as well as liability for any damages caused for a breach in due diligence obligations.

Companies covered by the regulation will also need to lay out plans for how they intend to meet global goals to limit climate change.

Forced Labour

The EU will introduce a ban on goods made using forced labour, in a move similar to the tough import restrictions introduced by the US to target products linked to alleged human rights abuses in China’s major cotton-producing Xinjiang region.

China has denied the claims, but the American restrictions have roiled fashion’s supply chains. US customs officials have held millions of dollars of goods suspected of links to the region, sending brands scrambling to get better oversight of where their cotton comes from.

The EU’s forced labour ban still needs approval from member countries, a final step that is usually a formality. It will come into force three years after it officially enters into law.

Ecodesign

Clothes and footwear sold in the EU will need to be more reusable, repairable, upgradable and recyclable under new rules intended to crack down on wasteful and excessive production and consumption with textiles as a key focus. The exact criteria set to apply to fashion products will be established by later legislation.

Companies will also need to plan to provide more environmental information to consumers via digital product passports and they’ll be required to publish details of unsold products each year.

Fashion brands operating in Europe will be forbidden from destroying unsold clothes within two years of the new rules coming into force.

What does this mean for fashion?

The regulations build on legislation that’s already rolling out, requiring large brands to do more to ensure their supply chains are free from deforestation and provide much more data about their environmental and social impact.

Efforts to introduce similar regulations are also under way in the US.

For the most part, the regulations apply to larger companies, but they may trickle down to smaller businesses via wholesale and buyer relationships.

Meeting the new requirements is a big and complicated task. The best positioned brands will already be making strategic investments that set them up to comply, stepping up supply chain traceability and monitoring capabilities, educating design and sourcing teams on the new rules and staffing up subject experts to help stay on top of the shifting landscape.

With just under six weeks until we gather at Stanly Ranch, in Napa Valley, California on June 3-5, we are pleased to announce the latest confirmed speakers for The Business of Beauty Global Forum 2024.

• Gisele Bündchen, philanthropist, New York Times bestselling author, wellness ambassador and model
• Heela Yang, co-founder and chief executive, Sol de Janeiro
• Danessa Myricks, founder and chief executive, Danessa Myricks Beauty
• Linda Gieskes-Mwamba, founder and chief executive, Suki Suki Naturals
• Dr Nigma Talib, naturopathic doctor, author and chief executive, Healthydoc
• Yoon Sung Choi, chief marketing officer, global marketing division, Laneige
• Angelica Munson, chief digital officer and executive officer, Shiseido Company, Limited
• Laureen Kouassi-Olsen, founder and chief executive, Birimian Ventures
• Alexander Gilkes, co-founder, Squared Circles
• Dr Joyce Gikunda, co-founder and director, Lintons Beauty World
• Renaud Salmon, chief creative officer, Amouage

They join a stellar lineup of previously announced speakers including integrative medicine pioneer Deepak Chopra, make-up artist and entrepreneur Gucci Westman and trans actress, comic, and content creator Dylan Mulvaney.

For the full list of confirmed speakers and detailed bios, please see below.

To request an invitation to join us at Stanly Ranch from June 3 to June 5, click here to complete the application form. Be ready to share what you can bring to the global beauty and wellness community.

The Business of Beauty Global Forum 2024 is made possible in part by our partners Front Row, Unilever Prestige and Stanly Ranch, and our awards partners The Estée Lauder Companies and Sephora.

Gisele Bündchen is a model, philanthropist, and author of the New York Times bestselling cookbook “Nourish” and her 2018 title “Lessons: A Path To A Meaningful Life.” In 2023 she partnered with Gaia Herbs, an herbal supplement brand focusing on regenerative and organic farming, as their wellness ambassador to spread awareness about herbal remedies and how they support everyday health. Beyond her professional career, she created the Agua Limpa Project, which spearheaded water cleaning efforts in her hometown of Horizontina, Brazil. She was recently appointed to the board of the Lotus House, a Miami-based shelter for women and children in the US. Bündchen has also partnered with the Brazil Foundation and created the Luz Alliance Fund that, during the pandemic, provided funding for relief to Brazil’s vulnerable families. Now, the fund supports projects focused on regenerating fragile Brazilian ecosystems.

Heela Yang is the co-founder of Sol de Janeiro, a body care and fragrance label. Under Yang’s leadership, the brand has grown its assortment to over 30 products, many of which have gone viral on social media, and reached an estimated global retail sales of $1 billion in 2023. In 2021, L’Occitane acquired a majority stake in the business. Prior to founding Sol de Janeiro, Yang worked with brands like Lancôme and Clinique. Yang holds a bachelor’s degree from Harvard College and a master’s degree from Yale University.

Linda Gieskes-Mwamba is the founder and chief executive of Suki Suki Naturals, a hair care brand for textured hair. In previous years, Gieskes-Mwamba practised as a lawyer and held positions at Biccari Bollo Mariano, Cabemery and Rudolph, Bernstein & Associates in Johannesburg, South Africa. Gieskes-Mwamba holds a bachelor’s degree and a law degree from the University of the Witwatersrand.

Danessa Myricks is a makeup artist, photographer and founder of the cosmetics brand Danessa Myricks Beauty, which she launched in 2015. Myricks, who is self-taught, uses her platform to educate others on the makeup techniques she has picked up in the course of her career. With her namesake brand, Myricks hopes to make the beauty industry more inclusive of historically underserved and underrepresented groups. Referred to as the “Willy Wonka of Beauty,” Myricks is known for product development and innovation. Myricks remains rooted in her artistry and holds values of community-building at the forefront of her label.

Dr. Nigma Talib is a naturopathic doctor specialising in the gut-skin connection. She is the founder of Healthydoc clinics with a location in Beverly Hills, California. She is also the founder of supplements label Dr. Nigma which counts Erewhon, Saks Fifth Avenue and Goop as retailers. Talib is the author of “Reverse The Signs Of Ageing/Younger Skin Starts In The Gut,” which was published in 2015. Talib has previously served on examination and quality assurance committees for the College of Naturopathic Physicians of British Columbia. Currently, she holds positions on the board of the California Naturopathic Doctors Association, actively contributing to legislation efforts aimed at modernising the scope of naturopathic doctors in California.

Yoon Sung Choi is the chief marketing officer of skincare label Laneige. In this role, Sung Choi is responsible for spearheading the global marketing initiatives of the Laneige brand, facilitating the brand’s global expansion. Sung Choi previously held positions at Benefit Cosmetics and MAC Cosmetics where she developed brand and product marketing strategies for the Eastern and Western markets.

Angelica Munson is the global chief digital officer and executive officer of Shiseido Company, Limited. Munson leads the digital transformation office where she integrates digital strategies and services including data analytics, digital marketing, media, e-commerce, artificial intelligence, and digital education to drive growth and innovation for the company. Munson has over 20 years of experience having held roles at Estée Lauder, Clinique and Fast Retailing, where she launched and scaled a number of direct-to-consumer businesses.

Laureen Kouassi-Olsson is the founder and CEO of Birimian Holding and Birimian Ventures, financial institutions dedicated to the sustainable development of African heritage brands. Through Kouassi-Olsson’s leadership, Birimian has established partnerships with institutions such as Institut Français de la Mode, Orange Bank Africa, International Finance Corporation, a subsidiary of the World Bank and a network of prominent private investors. The company has accelerated and financed 45 fashion businesses and entrepreneurs since founding. Kouassi-Olsson has been identified as one of the 100 most influential African Economic Leaders and is a member of the BoF 500. She is also the author of the book “Iconic Africa,” released in September 2023, advocating for the transformation of African creativity into an economic powerhouse. She holds a degree from Harvard Business School and EM Lyon Business School.

Alexander Gilkes is the co-founder of Squared Circles, a venture studio backed by LVMH-owned L Catterton and David Bonderman, which works to create products in health and wellness and food and beverage. To date Squared Circles have launched Magic Molecule, a skin healing product, Algae Cooking Club, an algal oil with chef Daniel Humm, and Freaks of Nature, a skin microbiome company for outdoor athletes with surfer Kelly Slater. They will launch 5 additional companies over the next three years in themes ranging from fertility, to Gen Alpha, functional nutrition and GLP1 nutrition. Gilkes is also the founder of Paddle8, an online auction house that specialised in art, photography and print which shut operations in 2020. At its prime, Paddle8 collaborated with curators and collectors Madonna, Damien Hirst, Madonna, Virgil Abloh and Elton John to broaden the appeal of fine art.

Dr. Joyce Gikunda is a pharmacist, cosmetologist and founder of Linton’s Beauty World, a beauty group with a network of stores in east Africa focused on beauty therapeutic treatments. Before being spun off as a standalone business, Linton’s Beauty World previously served as a service-oriented off-shoot of Lynton Pharmacy, a retail chain specialising in beauty and cosmetics owned by Gikunda and her husband Edward. Through Lynton Pharmacy, Gikunda partnered with brands such as Fashion Fair, Black Opal and Clinique for exclusive distribution in Kenya. Gikunda is also the founder of the Cosmetology Society of Kenya and Linton’s Academy, an accredited institution training the next generation of the beauty industry.

Renaud Salmon is the chief creative officer of Amouage, a luxury fragrance house based in Muscat, Oman. In this role, Salmon is responsible for designing and executing consumer touchpoints including product development. Prior to joining Amouage, Salmon previously worked on luxury leather goods at Delvaux and Louis Vuitton. He previously held the position of vice president of Marc Jacobs fragrances. He holds a master’s degree from the University of Liege.

Sales at constant exchange rates jumped 17% to €3.8 billion ($4.1 billion) in the first quarter, Hermes International SCA said Thursday. This was more than analysts expected.

The shares rose as much as 1.3% in Paris before reversing those gains. They’re up nearly a quarter this year, beating rivals LVMH Moet Hennessy Louis Vuitton SE and Gucci owner Kering SA.

Hermes typically caters to the most affluent customers which makes it more resilient in a challenging luxury goods market. Its fortunes contrast with the challenges at Kering, which is seeking to turn around its biggest brand Gucci — efforts that are taking time to bear fruit.

Hermes’ revenue in its key Asia Pacific market, excluding Japan, jumped 14% to €1.92 billion in the period, while its crucial leather goods and saddlery division grew by 20%, both better than estimates.

Hermes saw softer traffic in Greater China in March after the Chinese New Year with a “slight erosion” of customers buying more affordable products such as its silk scarves. But that was compensated by shoppers splurging on its more expensive leather, ready-to-wear and jewelry goods, Chief Financial Officer Eric du Halgouet told reporters on a call.

Hermes’ perfume and beauty and silk divisions grew by 4.3% and 7.9% respectively during the quarter.

Learn more:

Kering, Prada and Hermès Fill in the Blanks on Luxury’s Slowdown

This week, more luxury brands will report first-quarter results, offering clues as to how broad and how deep the downturn is going to get.