Non-Competes and End Runs Around Non-Competes

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The Federal Trade Commission (FTC) has issued a final rule barring most existing and future non-compete agreements. Traditionally businesses have tried to use non-compete agreements to prevent the unauthorized disclosure or misuse of proprietary business information (such as trade secrets). In light of these developments, businesses are encouraged to explore alternative ways of protecting their sensitive information, such as strengthening intellectual property rights through patents, trademarks, copyrights, and nondisclosure agreements (aka: NDA’s) as viable substitutes for traditional non-compete agreements

Key provisions of the new FTC rule stress the importance of identifying all existing non-compete agreements. The rule requires employers to provide clear and conspicuous notice to the workers that their non-compete clauses will no longer be enforceable by a specified effective date.

In addition to federal regulations, employers should stay informed about evolving state laws governing non-compete agreements, as recent judicial trends suggest courts are increasingly reluctant to limit employee mobility.

In light of these developments, it is ever crucial for employers to underscore the importance of trade secret protection to all employees, whether current, new, or prospective. This includes integrating clear confidentiality provisions into employment agreements, ensuring awareness through exit interviews, and requiring Employee Separation Agreements or Termination Statements acknowledging employees’ obligations regarding trade secret confidentiality.

Please feel free to reach out to MNK Law for questions on noncompete clause and guidance on compliance.

This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.