As it had been encouraged by President Biden after he took office, the Federal Trade Commission (FTC) today finally took steps to regulate employee noncompete agreements at the federal level. Our colleague, Brian Esler, provides a great overview of what we know and don’t know as of today: FTC Proposes New Rule to Ban Employment Noncompetes | Miller Nash LLP.
As Brian notes, this doesn’t provide certainty that such a rule will, in fact, be adopted or what it will look like if it is. As we noted previously, there are steps that employers may want to take now to minimize its impact and/or avoid unnecessary uncertainty. These steps include:
1. Consider using other types of agreements to protect your legitimate interests.
Noncompetes are just one type of restrictive covenant. Other types of agreements may offer the same result that an employer wants to achieve with a noncompete, but at least if done correctly, aren’t subject to the same state (and perhaps soon to be federal) limits on enforceability. Nonsolicitation agreements can prevent departing employees from taking customers and other employees with them. Nondisclosure agreements can prevent employees from giving your confidential information to a competitor or using it to compete against you. Invention assignment agreements can ensure that employers own the rights to intellectual property the employees create and keeps it away from competitors.
2. Create and maintain robust policies to protect proprietary information and address confidentiality obligations, and train employees consistently...and often.
Comprehensive workplace policies are effective ways to buttress or even supplant post-employment contractual restrictions. In fact, most employers likely already have codes of conduct and confidentiality policies addressing how employees are to handle sensitive and proprietary information. Consider revisiting and updating those now to be sure they are as robust as needed for your particular business interests. And be sure to train all employees on the applicable policies, especially front-line managers who are likely to be the people enforcing these policies.
The legal issues impacting workplaces are ever changing (Employment Law in Motion!) and since publication, new or additional information not referenced in this blog post may be available.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.