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Protecting Your Business in Light of the Federal Trade Commission’s Proposed Ban on Non-Competes

When you own a business, you are only as protected as your trade secrets are. That is why you should pay close attention to the Federal Trade Commission’s (FTC) recent proposal to ban non-competes in most contracts. On January 5th, the Federal Trade Commission (FTC) issued a Notice of Proposed Rulemaking that, if implemented, would functionally prohibit any employer in the United States from entering a non-compete clause with their workers.

For decades, non-compete agreements and provisions have been a cornerstone of business security, ensuring that employers and business owners are not subject to their trade secrets being circulated without their consent. However, in recent years the practice of entering into non-compete agreements has come under broad scrutiny, leading to conditional prohibitions of the agreements in states including Maryland and Oregon and full bans in states including California and Oklahoma.

The FTC’s newest proposal will take these limitations further by imposing them on all businesses throughout the United States. Should it go into effect, it will not only prohibit non-competes from being enacted, but it will nullify any existing agreements and require businesses to issue formal letters of rescission to all impacted employees. This applies to current and former employees who have been bound by a non-compete agreement.

Though unlikely, even if this proposal is thrown out, we recommend that businesses and employers find and utilize alternative protective measures to limit reliance on non-compete agreements. The continuing increase in scrutiny of non-compete agreements is predictive of an impending invalidation of those agreements, whether now or in the near future.

It is imperative that businesses make plans and create systems outside of non-competes for protecting company information, especially in the case of employees transitioning out of the business. Contact us today to ensure you are best equipped to protect your trade secrets and business interests.

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