Last month, the FTC dropped a bomb by banning almost all non-competes (FAQs here). Now both the Senate and the House have reintroduced the Workforce Mobility Act, which narrows the use of non-competes. Last night, Biden raised the issue at his State of the Union.
Non-competes are under fire. Yet we all know a company can and should protect its goodwill and guard against the release or use of its trade secrets or other confidential information. How? Through well-crafted agreements with its exempt, white collar and/or highly compensated employes. Sounds easy enough, but recent Court decisions, as well as state and federal regulations, are making that process significantly more difficult.
DID YOU KNOW that if your company furloughed employees without pay during the COVID-19 pandemic and then rehired them that any confidentiality, nondisclosure, non-solicitation and non-competition agreements (a/k/a “restrictive covenant agreements”) that those employees signed before the furlough may now be invalid? If you have not put new agreements in place, your company’s goodwill, trade secrets, hard-earned clients and confidential information may not be properly protected.
DID YOU KNOW that your restrictive covenant agreements cannot prevent ordinary competition, meaning the right of employees to use their knowledge, experience, and skill to compete against your company? Employers who fail to limit the scope of their restrictive covenant agreements to the protection of goodwill, trade secrets and confidential information could have their agreements deemed invalid.
DID YOU KNOW that Courts will not allow an employer to “appropriate the goodwill of the employee” through a restrictive covenant agreement? If an employer fails to clearly and carefully distinguish between an employer’s goodwill and an employee’s goodwill in their agreements, those agreements might not be enforced by a judge or a jury.
Protect Your Business
If you think your restrictive covenant agreements may not pass muster, fear not! We can help you put new agreements in place. We have a comprehensive fixed fee service, crafted to comply with the FTC rule and your state and local authority. Our Preserve Confidential Information – Secure Customer & Employee Relationships – Safeguard Goodwill service reviews all restrictive covenant agreements, individual employment agreements, personnel policies, and your handbook to ensure compliance.
Give us a call at 508.548.4888. We can help.