The United States District Court for the Northern District of Texas overturned the FTC’s rule banning most, if not all, post-employment non-compete agreements. The rule now applies nationwide, and is likely the FTC will appeal the decision.
This article will dive into what this means for small business owners in Texas.
What does this mean for employers?
Noncompetes are important for businesses to safeguard their human assets and proprietary information in order to remain competitive. Non-competes help protect these essential assets, ensuring businesses remain compliant with legal standards while mitigating risks. Having well-drafted non-compete agreements helps businesses be in a better position to secure their valuable resources, and preserve their market position and long-term growth. Ultimately, this ruling is a huge win for employers.
Take Aways
As it has done in the past, the FTC can still challenge unreasonable non-competes. By using the state’s antitrust and consumer protection statues, Attorneys General can challenge unreasonable non-compete agreements in states that permit non-competes in some form. On a case-by-case basis, The FTC, the states, and private plaintiffs will now need to challenge by picking the most appalling uses of non-compete agreements.
The decision is expected to be appealed at some point, and employers are not required to comply with the FTC rule for now, but businesses should analyze their use of non-compete agreements to ensure they will protect legitimate business interests and follow the state laws that apply to them.
Businesses should take the time to audit their trade secret policies to better assess the integrity of these programs with and without non-competes. The key to a strong trade secret policy is by having a properly tailored confidentiality agreement. Documented exit interviews are a useful reminder to employees leaving about any ongoing obligations they may have with respect to a company’s valuable confidential information. They can provide powerful evidence in a trade secret lawsuit that the company engaged in protective measures reasonably.
Get ready for some changes
As an employer, you should wait and see what happens. Now that the rule is officially passed, it’s highly likely legal challenges will prevent the rule from becoming fully effective for years. As always do what’s in the best interest of your business.
Need advice on properly preparing noncompetes? Contact us to get help.
