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How to handle the end of noncompete agreements

On Behalf of | Apr 30, 2024 | Business Law

There are appeals to be made and more debates ahead on the issue, but the Federal Trade Commission (FTC) recently announced a final ruling that, for all practical purposes, ends the use of noncompete agreements.

Despite being an integral part of the way that companies have long used to protect their proprietary information, non-competes have proven problematic. Critics say that they unfairly restrict opportunities and stifle innovation, especially when they’re used overbroadly – and some companies did routinely require noncompetes from low-level, rank-and-file employees as often as they did top-level executives and key players in their organizations.

5 things you can use instead

So, what can you do to protect your business in the wake of the FTC’s new ruling? Here are some options:

  1. Non-disclosure agreements (NDAs): These agreements can be more narrowly tailored to protect specific confidential information, such as trade secrets, customer lists or proprietary technology.
  2. Non-solicitation agreements: Instead of preventing employees from working for competitors, non-solicitation agreements can prohibit them from soliciting the company’s clients, customers or other employees for a certain period after leaving the company.
  3. Confidentiality clauses: Including clauses in contracts that require employees to keep company information confidential during and after employment can help protect sensitive information.
  4. Intellectual property agreements: Agreements that assign any intellectual property they create during their employment to the company can prevent employees from using their work for competitive purposes after leaving.
  5. Garden leave clauses: These clauses require departing employees to serve out a notice period during which they are paid but not allowed to work for a competitor. This allows the company to transition without the risk of the departing employee immediately joining a competitor.

In general, it’s time to reassess how your company approaches the issue of protecting your future. With noncompetes likely a thing of the past, a proactive approach is your best move forward.