Written by BRYAN HAWKINS and COREY DAY
GOT A NONCOMPETE? PROBABLY NOT ANYMORE
The Federal Trade Commission Announced the Banning of Noncompetes
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ithin about a month of publication, one of the most sweeping employment law changes of the last decade will take effect. While that sounds hyperbolic, it might be a bit of an understatement. In late April, the Federal Trade Commission (FTC) announced its final rule banning noncompetes.1 For the uninitiated, noncompetes generally bar employees from seeking employment in the same or similar field, for a certain period of time, and within a set geographic distance and after the conclusion of their current employment. The thinking for employers is that if you are going to invest the time and money
1 https://www.ftc.gov/news-events/news/ press-releases/2024/04/ftc-announces-rule-banning-noncompetes W W W . ARTISANSPIRITMAG . C O M
to train an employee in your business, you don’t want that employee to turn around and open their own competing business or get poached by another business in your area. That said, noncompetes in many states (like California) were already limited by law in their enforceability. Even so, the FTC estimates that 30 million workers in America are subject to noncompetes in their employment agreements. The final rule not only bars use of noncompetes in employment agreements prospectively, but bars enforcement (with limited exception) of existing noncompetes retroactively. The FTC contends that noncompetes did what they said on the tin — they reduced competition in all areas of business. The FTC elaborates that “noncompetes tend to negatively affect
competitive conditions in product and service markets by inhibiting new business formation and innovation.” While you may not be using noncompetes in your business model, that doesn’t mean you aren’t affected. Noncompetes in the alcohol industry have been in the news lately.2 With this new rule, it is possible that your talent pool may grow, as people — bound by noncompetes and thus not actively considering new employment — have that concern eliminated. That said, the FTC went out of its way to explain what the rule does not do. The rule does not eliminate trade secret protections nor affect the validity of non-disclosure 2 https://vinepair.com/articles/hop-take-noncompetes-in-brewing/
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