Non-compete agreements have been around for hundreds of years and have been implemented in the United States for more than a century. But not everyone thinks they are fair, most notably President Biden who signed an executive order directing the FTC to consider abolishing them in certain circumstances.
Remind me what a non-compete agreement is?
Non-compete agreements, also known as non-competition agreements, are contracts that restrict an employee’s ability to work for a competitor or start a competing business after leaving their current employer.
Is this all Biden’s fault?
Nope – push back against non-compete agreements dates back to the early 20th Century. Now with the rise in both the technology and health care industries there has been a massive increase non-compete agreements.
What is unfair about a non-compete agreement?
On its face, nothing. It is entirely reasonable, and legal, for businesses to take measures to protect their trade secrets. The problem is that these agreements are not just issued to, say, a firm’s scientists or engineers – they frequently also extend to lower wage earners in an organization who may have developed a skill set related to the clientele of a particular organization but without nexus to trade secrets. The non-compete agreement, which is required as part the hiring process, prevents them from working for a competitor even if they are laid off due to downsizing.
But there is another aspect (aside from the limiting worker mobility) that supports rethinking non-compete agreements: stifled competition.
How did the FTC respond?
Game on – a new rule has been proposed which would do away with some noncompete agreements and preempt all state laws surrounding such agreements.
How Soon Is This Happening?
It may never happen, but if it does, a final rule, if achieved, will take months to go into effect and after that, many legal challenges are to be expected.
Why?
Here is what lawyers at Ogletree Deakins have to say:
“Any final rule will not go into effect for many months. If the rule goes into effect, it will face numerous legal challenges. First, the proposed rule likely exceeds the FTC’s legal rulemaking authority under the Federal Trade Commission Act and the delegation clause. Second, the rulemaking invades the state provenance of contract law. Third, the rulemaking may trigger the major questions doctrine—and, as such, any action purporting to ban non-compete provisions would need to be undertaken by the U.S. Congress.”
In the meantime, do you have any non-compete agreements in the RealDealDocs database?
We thought you would never ask. Here they are:
Fourth Amendment To Credit Agreements
Healthlynked Corp. Non-Disclosure, Non-Solicitation And Non-Compete Agreement
Employment Non-Compete, Non-Solicit And Confidentiality Agreement
Non-Compete And Non-Solicitation Agreement
Source
FTC Issues Proposed Rule to Ban Non-Competes: Is This the End for Such Agreements?
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