This week, the Federal Trade Commission FTC will be hosting a special event that can make a big difference in the lives of American workers. On Thursday, February 16th, the public is invited to participate in a forum regarding a proposed rule that would put an end to the use of noncompete clauses.
Noncompete clauses are terms within employment contracts that prevent employees from going to work for companies that are viewed as competitors. Though their stated intention is to protect the employer’s business interests, over the years their use has become more and more controversial, as unreasonable restrictions on industry, time, and distance have effectively stopped many workers from seeking better jobs. Some workers have even been forced to move in order to continue supporting their families.
Noncompete clauses have been scrutinized for years. Though workers often sign them unthinkingly, assuming that they would never be enforced, in recent years some companies have drawn attention to the practice by pursuing legal action against minimum wage employees. It is generally agreed that this type of action goes beyond the original protective action that noncompete clauses were meant for.
In the face of growing concern about the misuse of these legal prohibitions, the FTC has proposed a complete prohibition on the use of these restrictive covenants. If you are an employer who currently incorporates noncompete clauses in your employment contracts, or who has done so in the past and has workers whose agreements contain these terms, passage of the proposed rule would mean that you can no longer use them, and that any existing noncompete clauses would need to be rescinded. Importantly, you would be required to provide any employees with active noncompete clauses that they are being rescinded and no longer apply.
If the FTC action does go into effect, companies will still be able to make use of nondisclosure agreements that enforce the protection of trade secrets and proprietary information.
The public form that the FTC is holding will provide the opportunity for those who have been subjected to noncompete clauses to tell their stories, as well as for business owners who feel that they have value to do the same.
If you would like information on how this potential change might affect you, contact us today to set up at time for us to meet.