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Noncompete agreements may face an FTC ban

On Behalf of | Dec 1, 2023 | BUSINESS & COMMERCIAL LAW - Contract Disputes

One way that businesses have traditionally protected their own interests is with noncompete agreements. These keep employees from jumping between businesses, which is beneficial in its own right. But a noncompete can also be a way to try to prevent trade secrets or sensitive company information from changing hands.

However, the Federal Trade Commission (FTC) may ban the use of noncompete agreements in the future. A proposal to do so was introduced at the beginning of this year. If it passes, businesses would not be able to use noncompete agreements, even if employees would theoretically be willing to sign them. The contracts would no longer be upheld. 

Why would they change the rule?

The basis behind this proposal is that market competition is good for the economy. When workers can change jobs, it gives them more power if they are seeking higher wages. The FTC claims that about 30 million Americans have noncompete agreements, and they predict that overall worker earnings may increase – if the rule is passed – by $300 billion.

Keeping up with legal changes

As of right now, this is still just a proposal, so businesses may have noncompete agreements in place. But it’s important for business owners to understand that these rules and laws can change over time, and those changes can have a dramatic impact on the types of contracts employers can use. 

The potential banning of noncompete agreements could have a ripple effect through many industries, changing the way employment contracts are written and trade secrets are protected. Employers need to know exactly what legal rights they have, and when past practices may become prohibited.