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Can the FTC Ban Noncompete Agreements?

Jan 07, 2023

Noncompete Agreements serve to limit an employee’s ability to work for a competitor after leaving his/her current employer. Employers typically ask employees to sign a non-compete agreement at the commencement of their employment in order to limit the employee from working for a direct competitor and taking sensitive information with them. The issue for the FTC and employees is the concern that the agreements harm competition, suppress labor mobility and reduce wages. 

When employees are hired for a new job, many sign the agreements without reading them, or feel as though they don’t have a choice- either sign or don’t get the job. Many job seekers don’t have the option to pass on an otherwise satisfactory job offer, and feel compelled to sign, especially if they are financially dependent on the new job.

After the employee signs the agreement, he/she is restricted from future job opportunities after separating from the  current employer with regard to the scope of work and geographical location in which he/she can work. Some employees can only find work in the same particular field and will be required to relocate their home and families in order to obtain gainful employment while still complying with the non-compete.

On January 5, 2023, the Federal Trade Commission proposed to prohibit employers from using noncompete clauses. The FTC’s new rule would make it illegal for am employer to:

(1) enter into or attempt to enter into a noncompete with a worker;

(2) maintain a noncompete with a worker; or

(3) represent to a worker that he/she is subject to a noncompete.

The FTC estimated that eliminating noncompete agreements could increase employee earnings in the range of $250 billion to $296 billion per year.

At the time this article was written, it is not clear if the rule will be passed and what the final language will require. However, in the meantime, here are some things Florida companies can do to protect itself if the rule is passed:

(1) Evaluate severance agreements, offer letters and employment agreements and create a list of those that could be impacted by the proposed rule;

(2) Consider developing a plan for updating agreements and providing required notice to current and former employees impacted by the change;

(3) Remind employees of their ongoing duty to preserve and not disclose company proprietary information. Florida businesses can do this by providing employee training and/or use of a log-in notification when accessing sensitive company information;

(4) Limiting sensitive information on a need to know basis. Not all employees need access to all information at all times.

As mentioned above, even if the rule is passed and noncompete agreements are banned in Florida, there are many other tools Florida businesses can use when protecting their confidential information so it doesn’t land in the hands of its direct competitor from a disgruntled employee. If reading this article, make sure you are reading the most up to date information, as the law is still changing in this area.

Contact a Florida employment lawyer to discuss noncompete agreements and best practices to protect your company with employees.

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Disclaimer: The information on this website is for educational purposes only. The information does not constitute legal advice, and does not create an attorney client relationship with Karly Wannos, The Wannos Law Firm, P.A. or any other attorney employed by the firm. Karly Wannos is licensed to practice law in Florida only, and the information presented on this channel applies to Florida and Federal law only and is not otherwise state specific. Please consult with an attorney before making any important business related decisions. The contents of this post are owned by Karly Wannos, and cannot be duplicated or replicated without her express written permission. May be deemed an attorney advertisement.

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