Non-competes are used to protect businesses from competition. A non-compete agreement generally prevents an employee from leaving a business and going to a competitor or starting a competing business for a specific amount of time. This, in theory, helps to ensure trade secrets are not given to competitors by ex-employees. However, this arrangement presented many issues for employees who could not seek work in their respective fields in their area because of the terms of a non-compete.
A new ruling by the Federal Trade Commission (FTC) seeks to end non-compete agreements. Despite how useful they have been for businesses, many people looked unfavorably at their broad use that targeted high- and low-level employees. The unfair use of non-competes is believed to hinder opportunities, freedom and economic liberty.
Some major businesses are not keen on this change. It is believed that allowing non-compete agreements to be banned would promote competitiveness. Several parties are challenging this ruling. But, if the ruling stays, businesses will need to respond to this change accordingly.
Tools to protect intellectual property and business operations
Non-competes are not the only way to protect businesses. Employers can still use the following tools to help prevent ex-employees, contractors and partners from misusing trade secrets:
- Non-disclosure agreements (NDAs)
- Garden leave clause
- Intellectual property agreements
- Confidentiality clauses
Employees may still be held accountable for their actions if they violate an agreement and jeopardize the value and image of a business. Business owners need to adapt quickly to economic changes to continue protecting their interests. Employers can seek legal guidance to learn how to safeguard against competition now that non-competes are (likely) unenforceable.