Non-Compete Agreements

Non-compete agreements have been enforced in most states for hundreds of years. Many state laws related to non-compete agreements have been enacted over the past three years. Earlier this year, President Biden issued an Executive Order encouraging the FTC to regulate the “unfair use” of non-compete agreements and other similar restrictive covenants. At this point, there has been no clarification of what regulations are on the horizon to curtail the use of ‘unfair’ non-competes. Even without further FTC regulations, employers can begin by taking these steps:

  • Ensure that you are not imposing unreasonable restrictions. Non-compete agreements must be necessary to protect a legitimate business interest. The restrictions need to be reasonably tailored to your scenario. Sometimes the details about enforcement and process can be just as useful to protect the business (e.g., clauses on venue, attorney’s fees, governing law).
  • Consider the impact of the agreement on employee mobility. Could other agreements, like non-disclosure agreements, be used to protect the business? Would you be willing to forego the agreement if a lower wage is accepted?
  • Tailor your non-compete agreement to the need and position. Consider whether low wage or non-exempt workers need to be restricted at all or in the same manner to protect your business. Could your trade secrets or other confidential information be protected another way?
  • Be very cautious about no-poach agreements even if ancillary to a business contract.

We have been involved in strategy discussions with MDs, ODs, APPs, therapists, and others about the use of non-competes and restrictive covenants. In today’s competitive marketplace, it is prudent to strategize now and not wait to hear if and when the FTC will promulgate new regulations.

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