The Federal Trade Commission’s recent ruling to ban non-compete agreements has sparked widespread concern among employers and business owners nationwide. The Commission’s decision stems from its recognition that non-competes tend to negatively affect competitive conditions in both labor markets and in products and service markets by hindering the emergence of new business and employment opportunities. This final rule aims to promote competition by protecting the fundamental freedom of workers to change jobs, increase innovation, and foster new business formation. Nevertheless, it is important to acknowledge that this ban will retroactively invalidate 30 million agreements and will affect every type of business and employer, with only a few exceptions including senior executives and business sales.
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For those unfamiliar, non-compete agreements impose conditions on employment that prohibit a worker, penalize a worker, or function to prevent a worker from seeking a new job or starting a new business. These agreements often force workers to stay in a job they wish to leave or compel them to endure hardships like relocation or accepting lower paying positions. While non-competes may adversely affect workers, they serve as a beneficial tool for business owners and employers, protecting them against disclosure of trade secrets and confidential information that could be harmful to them.
Despite the impending ban and depending on the specific interests an employer seeks to protect with a non-compete agreement, there may be alternative methods employers could potentially adopt. However, it’s important to note that there is no guarantee of effectiveness in circumventing the impending ban. It is advisable for employers to proactively explore these options to as a protective measure to continue safeguarding their businesses before the ban takes effect in September of 2024. Some alternative measures include:
- Implementing non-disclosure agreements to safeguard sensitive information,
- Implementing non-solicitation agreements prohibiting an individual from seeking to recruit or solicit clients, customers, or employees,
- Implementing Garden leaves, or periods during which an employee is relieved of all or some of their job duties while still receiving full pay and benefits, and
- Leveraging the inevitable disclosure doctrine, the presumes an employee, through their exposure to confidential information, will inevitably disclose or use the information in a competitive manner.
As the conflict between employers and employees unfolds over the ban on non-compete agreements, we can only assume there will be a surge in litigation that will result from this new rule. If you would like help taking proactive measures to protect your company’s brand, proprietary information, methods, practices, or trade secrets, but don’t know where to start, please reach out to us at (713) 364-4796 or admin@madan-law.com.