Does the FTC Rule Banning Non-Compete Agreements Invalidate all Portions of Those Agreements?

The Federal Trade Commission's (FTC) rule banning non-compete agreements has garnered a lot of attention. Unless delayed, it will go into effect in August 2024.  While this rule has significant implications for business owners and employees alike, it's important to note that not all provisions typically included in non-compete agreements are affected by this rule.

Non-compete agreements are contracts between employers and employees that restrict the employee's ability to work for a competitor after leaving the employer. These agreements often include provisions such as the duration of the non-compete, the geographic scope in which the employee is prohibited from working, and the types of activities that are considered competitive.

While the FTC rule bans non-compete agreements for most workers, there are still provisions that are typically included in non-compete agreements that are not affected by this rule. Some examples of other provisions include:

Disclosure of Confidential Information 

Agreements that include non-compete provisions often also include confidentiality or non-disclosure clauses, that prohibit employees from sharing their employers’ confidential information with people outside of the business

Solicitation of Customers

Non-solicitation clauses often prevent employees from poaching existing or prospective customers from their former employer, are also commonly found in agreements that contain non-compete provisions. 

Solicitation of Employees

Non-solicitation clauses often prevent employees from poaching employees from their former employer are also common, especially in the current market where there’s significant competition for talent.

Intellectual Property Rights

This clause specifies that ownership of intellectual property created during the course of the employee’s tenure will be owned by the employer (typically). Intellectual property can include inventions, designs, trademarks, copyrights, and other creations of the mind.

These provisions are still valid under and enforceable under the new FTC rule.

Employees who have signed agreements containing non-compete provisions should review the terms of the agreement carefully to understand what provisions remain applicable to them. Employees who have signed agreements containing non-compete provisions should consider seeking legal advice from an experienced employment attorney to understand their rights and options. An attorney can review the terms of the agreement and assess whether it is enforceable under Pennsylvania law and the new FTC rule.

It's important for employers and employees to understand the implications of the FTC rule banning non-compete agreements and to seek legal guidance when drafting or enforcing these types of agreements. By working with an experienced attorney, both parties can ensure that their rights and interests are protected while complying with applicable laws and regulations.  The experienced attorneys at Fiffik Law Group are ready to help you understand how this groundbreaking FTC rule impacts your business.