The rule makes it illegal to include the agreements in employment contracts and requires firms with active noncompete agreements to inform workers they are void.
Weren’t noncompete agreements essentially unenforceable before this because of court rulings? Forcing employers to notify employees of this is definitely good, though.
Prior to this, the restrictions on non-competes varied by jurisdiction. Many were similar to Texas:
Under Texas law noncompete agreements can be enforceable if:
The noncompete provision is part of an otherwise enforceable agreement.
The non-compete requirement is supported by valid consideration (consideration meaning something of value provided to the employee).
The non-compete requirement is reasonable in geographic scope, timeframe, and activities being restrained.
The factors were issues for a jury. Even with this change from the FTC, I expect companies will still be able to pursue prohibitively expensive litigation against former employees for things like theft of trade secrets. Even a bogus claim can cost many thousands of dollars to defend even if it is meritless.
Weren’t noncompete agreements essentially unenforceable before this because of court rulings? Forcing employers to notify employees of this is definitely good, though.
Unfortunately no. There are people being sued today for violating non compete clauses by their employers. Particularly in the healthcare industry.
Jesus, real love for essential workers there. I might be confusing it with district court rulings, either way I’m glad it’s getting addressed!
Prior to this, the restrictions on non-competes varied by jurisdiction. Many were similar to Texas:
Under Texas law noncompete agreements can be enforceable if:
The factors were issues for a jury. Even with this change from the FTC, I expect companies will still be able to pursue prohibitively expensive litigation against former employees for things like theft of trade secrets. Even a bogus claim can cost many thousands of dollars to defend even if it is meritless.