The FTC’s attempt to ban non-compete agreements saw a major setback a couple of months ago when a Texas court ruled it was unlawful. Since then, this topic has become a political “hot potato” where the level of attention required by employers depends on both federal and state laws and regulations. As an employer, what you need to know now is that the ban did not take effect and employers are still free to enforce non-compete agreements. But it’s also smart to remember that going forward certain states are more likely than others to place additional emphasis on getting the ban passed in the future. As a business leader, here are a few other things related to non-competes that you should think about:
1. Now is not forever. While the FTC’s attempted ban didn’t pass now, we know that the bluer states are more likely to put more effort into passing it in the future. Whether it’s altering policies, limiting certain language, or changing the extent to which employers can control what former employees do and where they land…there is a good chance that we’ve not heard the last on this subject because it’s now part of more mainstream conversation.
2. Review your agreements regularly for fairness. Even though the ban didn’t pass, it’s smart to revisit your agreements now that we know of the added scrutiny. Things moves fast for smaller businesses too, and this can change your risk areas and risk tolerance very quickly. It’s smart to revisit your non-compete agreement annually to make sure it is appropriately serving your business and aligned with federal and/or state laws and regulations.
3. Know individual state laws pertaining to restrictive covenants. Non-competes fall under the ‘restrictive covenant’ umbrella, which also includes confidentiality, non-disclosure, and non-solicitation agreements. Some states have varying laws on each and the differences range from major to minor. It’s important to be clear about which laws are applicable to your business.
4. Tighten up on how you protect company proprietary information. The current status of the non-compete ban gives employers more time to think about other important factors that are part of the bigger picture with restrictive covenants. For example, now is a great time to revisit how you access, share, and store any company trade secrets or proprietary information and to review your policies in these areas too.
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