Non-compete agreements are clauses in employment contracts that prevent workers from working for “competitor” companies during or after their current employment. These contracts typically restrict workers through a period of time, industry, and/or geography. Sometimes, non-competes prevent workers from starting their own competitor companies.
Non-competes were originally created to protect business trade secrets and other confidential information. However, the Federal Trade Commission (FTC) has proposed a new rule that would ban employers from imposing non-compete clauses on their employees, mainly citing that the agreements stifle workers’ mobility and earning potential.
The proposed rule prohibits all non-compete agreements except those entered as part of the sale of a business and requires employers to rescind all non-compete agreements currently in place within 180 days of the date of the final rule publication.
Should the rule go into effect, business leaders will need to consult legal counsel on other methods and tools available to protect proprietary information.
Please reach out if you need to consult an expert on this issue.