For years, business owners regularly used noncompete agreements. These contracts restricted an employee’s ability to seek a different job—often stating they couldn’t work for the competition for a certain amount of time or within a specific geographic area after leaving their position. The idea was to make it more difficult for a former employee to bring trade secrets or other sensitive information to a competing company.
Last year, however, the Federal Trade Commission banned noncompete agreements. Their reasoning was that these contracts were too restrictive for workers, potentially limiting career growth and suppressing wages. After all, if an employee couldn’t work for a competitor, they would have far less leverage to seek a raise or promotion, as they were essentially trapped in their job. But banning noncompetes outright also means that businesses have lost an important tool for protecting intellectual property.
Exploring other options
The key moving forward is to consider other legal options that can be used in employment contracts. One example is a non-disclosure agreement (NDA). An employee may now be allowed to work for a competitor, but they would still be legally prohibited from disclosing trade secrets or proprietary information, even after leaving the company.
Another option is investing heavily in other forms of intellectual property protection, such as patents, trademarks and copyrights. With the right protections in place, secrecy becomes less of a concern because only one business is legally allowed to use the protected materials or ideas.
This shift highlights how employment contracts are evolving. It’s important for business owners to fully understand their rights and obligations in this new legal landscape.