The Backstory (Cliff’s Notes Edition)
- The Biden administration hates noncompete clauses (bad for worker wages and stuff).
- The FTC swoops in with a nationwide ban, claiming it has the power under a dusty old law.
- Legal challenges start brewing in Texas (shocker) and Pennsylvania.
- Nobody knows if the ban will actually stick.
Who’s Exempt (the Lucky Few)
- Senior Executives (a very exclusive club): But only if they make a boatload of money and have real policy-making power (think CEOs, not regional sales managers).
- Existing Noncompetes with Senior Executives (but not for long): These can stay in place, but you can’t make new ones after September 4th.
The In Club (the Rest of Us)
- No one else is exempt. Your noncompete clauses are toast.
- You even need to notify folks of the ban.
What You Can (Still) Do
- Confidentiality Agreements (NDAs): Still your friend – as long as they don’t restrict what someone learned on the job.
- Non-Solicitation Clauses (with caution): They might be okay, but tread carefully. Don’t make them so broad they basically become noncompetes.
- Garden Leave Clauses: You can still pay someone to sit at home and not work for a competitor during their notice period.
The Legal Challenges (Spoiler Alert: It’s Complicated)
-
- Texas is leading the charge: A judge might block the ban nationwide before September 4th.
- Pennsylvania is taking its time: They’ll eventually decide if the FTC overstepped its authority.
- No one is betting these will save us from enactment. So pay attention!
The Bottom Line
- The future of noncompetes is murky.
- You might have to adjust your employee contracts.
- Lawyers are going to have a field day.
- We continue to think the best offence is a good defense so protect yo’ stuff from those who may compete later.
Bonus Tip!
- Keep an eye on those legal challenges. They might save your noncompete bacon (or not).
Passing the Buck
- We keep saying it: This is an IT problem. If folks can’t get to your confidential information, they can’t use it to compete.
And… that’s it for now. Yes, we know this is a superficial review. We wrote it as an overview because the whole situation is complicated and in flux.
If you’d like more targeted and appropriate strategies, please reach out ASAP, because it looks like we will be busy before and after the September 4th deadline.
