FTC NON-COMPETE RULE: Preliminary Suggestions
Below is the list that I created to serve as a quick guide for things we should be thinking about related to the new FTC Non-Compete Rule.
Background
If the new Federal Trade Commission (FTC) rule banning non-competes (16 C.F.R. Part 910) survives legal challenges, it will eliminate the use of most non-competes with employees and contractors and require companies to notify current and previous employees and contractors that their existing non-competes are void. There are limited exceptions to the new rule, but preliminary indications are that a substantial majority of non-competes will no longer be enforceable, impacting thousands of businesses and millions of employees and contractors.
Preliminary Suggestions
Closely monitor activity and announcements related to the new FTC rule including any changes to its effective date and any modifications. I plan to publish updates as they are made available.
Review your existing non-compete agreements and other non-compete clauses in your contracts to confirm compliance, or areas of non-compliance, with the new rule. If non-compliance, determine action necessary to enable compliance.
Evaluate your other existing company agreements to see if they already cover certain interests protected by your non-compete agreements, including worker duties related to non-disclosure of company confidential information and non-solicitation.
Consider creating a contact list of all current and previous workers, including employees and contractors, subject to a non-competition agreement with your organization. You should not send notices to your workers related to the new rule until existing legal challenges to the new rule have been addressed, and you have confirmed when notices are required.
Confirm whether your business includes any senior executives, as defined by the new rule. If so, evaluate whether these senior executives should sign non-competes prior to the effective date of the new rule. Under the new rule, certain senior executives may still be subject to non-compete restrictions if such agreements are signed before the effective date of the new rule.
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