Non-compete agreements used to be a way for business owners to keep their workforce on the job. If an employee signed a non-compete agreement saying they wouldn’t work for the competition for a year after leaving their position, then they would be in violation of that agreement if they took another job. Employees would also sometimes be asked to sign non-competes stating that they would not start a competing business for a specific timeframe after leaving their place of employment.
While these were beneficial for business owners, helping them maintain a consistent workforce and protect intellectual property, they can no longer be used. The Federal Trade Commission has banned them in almost all instances. There are minor exceptions that will apply to a very small percentage of American workers; some executives can still use non-compete agreements, for example. But, for the vast majority of workers, these have been banned.
Why was this decision made?
The FTC made this decision because they believe it will benefit workers and increase their wages. Noncompete agreements made it impossible for people to switch jobs, even if they were offered more money. Now that those agreements have been banned, companies have to compete for top talent by paying high salaries, not just by having workers sign prohibitive contracts.
But, this can create some issues for business owners, as well. If they were using the noncompete agreements to protect their IP, they may be concerned that an employee will take important information with them to a new job. For this reason, employers need to know about the changes to the law and the other options they may have, such as using nondisclosure agreements.
