This week it was announced that the Federal Trade Commission is exploring the possibility of implementing a rule that would prevent the enforcement of non-competes against former employees. I believe this is going to happen. I also believe that many states will enact laws invalidating noncompetes. This is going to take some time, probably 10 years or more. But when all is said and done, I do not believe noncompetes will be recognized as enforceable in any meaningful way in this country.
Do you think this will drastically change the playing field for employers? I do not.
First, employers will still have protection for trade secrets. Second, employers may still have the ability to restrict solicitation of customers, even if they cannot restrict competition generally. Third, employers will still have every opportunity, through the implementation of best business practices, to solidify their business relationships, such that competition from former employees will not pose a danger to their businesses. Fourth, and perhaps most importantly, employers will be incentivized to maintain good relationships with existing employees to avoid the consequences of potential future competition from former employees.
In short, the FTC’s action is more likely to change the way in which employers conduct their businesses than it is to harm their businesses. Stay tuned.