Practical And Successful Solutions To
Business And Intellectual Property Legal Issues

Businesses must prepare for changes with non-compete clauses

On Behalf of | Apr 25, 2024 | Business And Commercial Law |

For Florida businesses, the ability to protect their interests with a non-compete clause is imperative. This agreement prevents employees from working for their competition or opening their own business in the same industry in nearby areas until a certain amount of time has passed.

There have long been debates as to the fairness of non-compete agreements. Advocates for banning the practice claim that it prevents workers from seeking higher-paying employment without needing to move and uproot their family. Businesses say it is essential as it protects their interests from competitive threats. Now, the Federal Trade Commission has made substantive changes to the law for non-compete agreements and businesses must prepare to adapt.

For-profit employers cannot mandate non-compete agreements

The FTC put in effect a ban on non-compete agreements. Three of the five commissioners of the FTC voted for the change. There is a belief that appeals to the new law will be extensive and could be successful. A lawsuit by the U.S. Chamber of Commerce is already planned.

Despite the back and forth as to whether the law will be allowed to move forward as is, employers should know how it might affect their operations. An estimated 20% of workers across the nation have a non-compete agreement. The FTC says that they are therefore prevented from finding similar employment. This keeps their wages lower than they need to be and keeps prospective business owners from going out on their own.

Notably, the law will also impact current non-compete clauses. The agreement will be unenforceable after the rule goes into effect. That is 120 days after the Federal Register publishes it.

Earnings are also a determinative factor in whether a person will continue to be bound by the non-compete clause. People categorized as senior executives who earn over $151,164 per year and make policy for the business will still be held to the agreement.

Running a business requires adapting on the fly

Although the durability of the ruling remains in flux and the law could be nullified on appeal or could be altered significantly, it is still crucial for business owners to be prepared for every eventuality. A non-compete clause is used to protect a business from insiders using their information and skills against the business. If it is changed, the business will need to change with it. Understanding what this means can be difficult and having comprehensive help experienced in business law is wise.