What steps can you take to make sure your business is prepared for non-compete agreements being banned?

Non-compete agreements will be banned nationwide starting September 4, 2024 unless there is a successful legal challenge to the recent FTC rule before then. There are steps employers must take before the rule goes into effect, and several recommended options they may wish to consider.

The rule will ban almost all non-compete agreements across the country, including causing existing non-compete clauses to be void, with exceptions only made for certain company executives who reach set salary thresholds. This creates two key issues that will impact almost all employers:

1. Employers who have existing non-compete agreements will need to analyze if those agreements will be impacted by the rule and, if so, provide notice to these employees that the non-compete will no longer be valid; and
2. Employers will need to evaluate alternative options to protect their business interests.

Steps You Can Take Now

1. Evaluation: Evaluate any existing non-compete agreements you have to determine if they will be affected by the rule on September 4, 2024.
2. Notice: For any agreement that will be affected, prepare written notice to the employees informing them that the non-compete agreement will no longer be effective on September 4, 2024.
3. Commence Legal Action: If you are aware of any employees who violated an existing non-compete, you should consider bringing a legal action before the new rule goes into effect.
4. Negotiate: Negotiate with any employees who would qualify as “executives” exempt from the FTC rule to add or update non-compete agreements before the rule goes into effect.
5. Alternatives: Discuss alternative ways to protect your legal interests. Some options may include:
   • Non-Solicitation: This prevents employees from targeting your other employees or your clients if they leave.
   • Confidentiality: This limits the employee’s ability to use confidential information of the business.
   • “Work for Hire” Language: You can make sure that any work product created by your employees as part of their job belong to your company and not to the employee.

It is important to understand your options and obligations before the FTC Rule begins. This is a complex area of law so feel free to contact us with any questions or concerns you may have. An experienced business attorney can help give you peace of mind.

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