Employers have only six weeks to ensure that their non-compete obligations and practices in the implementation and enforcement of these agreements comply with specific legal requirements. Given the significant changes brought about by the new law, employers should consider the following action points: Duration: The law limits non-compete obligations to one (1) year after termination of employment. However, in two scenarios, this period can be extended up to two (2) years – if the employee has breached a fiduciary duty to the employer or has illegally taken property from the employer (physical or electronic). This is potentially important for employers, as they are often faced with the all-too-familiar scenario of an employee running away with their documents and information. While this provision does not remain silent on the wording of non-compete obligations, it implies that a toll provision would not be enforceable without a breach of the duty of loyalty or theft. On July 9, 2021, President Biden signed the Executive Order to Promote Competition in the U.S. Economy (“Order”). As Covington has already pointed out, the contract covers a number of competition issues. The order, which is particularly relevant to non-compete obligations between employers and employees, encourages the FTC to use its rule-making legislative power “to restrict the unfair use of non-compete obligations and other clauses or agreements that may unfairly restrict worker mobility.” Executive Order, Section 5(g).
While the FTC has yet to issue such rules, the order follows a 2020 FTC workshop on employer-employee non-compete obligations. It also comes shortly after the FTC announced a new set of rules and updated rule-making procedures to expand rule-making power under 15 United States. C “to live again”. § 57a and “assist in the planning, development and enforcement of rules – in particular new rules […]”. While we wouldn`t expect the FTC to see a formal rule proposal for several months — and there`s a lot of speculation about what that rule might contain — employers should take this time to review the restrictive covenant agreements they require of their existing applicants and/or employees. Even under the current law, many employers often exaggerate when they comply with these agreements or make other mistakes that make them unenforceable. A non-compete obligation is a contract between an employee and an employer. A non-compete obligation prohibits an employee from participating in a business that competes with the business of their current employer. While an employer may not require you to sign a non-compete agreement, they may terminate or choose not to hire you if you refuse to sign. As a general rule, courts do not approve non-compete obligations. In disputes relating to non-compete obligations, the courts take into account certain factors when deciding whether the agreement is appropriate. If you find that you are negotiating a non-compete obligation, you should limit the agreement to what is necessary to protect the employer and require severance pay in the event of termination.
Below is an overview of how a non-compete obligation may affect you. The type and amount of additional consideration required varies considerably depending on the State in which the agreement is applied. In most countries that need to be considered beyond job retention, an additional consideration may take the form of a change in professional obligations, promotion, additional remuneration or additional benefits. Access to confidential information or additional training may also be sufficient. In North Carolina, a one-time payment of $500 was considered sufficient consideration for an existing employee`s non-compete obligation. For example, in Florida, the law supports non-compete obligations, so the facts of your situation and the state in which you live determine where the agreement is enforced against you. The need for additional consideration is generally motivated by concerns that employers might otherwise insist that employees sign “retrospective” non-compete obligations shortly before their dismissal. Such a measure would seriously limit the possibilities of new employment without compensation for the worker. [A]n agreement between an employer and an employee or otherwise arising out of an existing or intended employment relationship under which the employee or intended employee agrees that the employee will not engage in certain activities that compete with the employee`s employer after the end of the employment relationship [.] Many employers use “restrictive agreements” (p.B non-compete clauses, solicitation and non-disclosure agreements) to protect their confidential information, customer relationships, trade secrets or other intellectual property rights and otherwise prevent unfair competition. This article examines many of the most common mistakes made by employers that affect the enforceability of their agreements and can result in costly losses for the employer.
Scope of activities: The agreement must be “reasonable” in relation to the prohibited activities that are restricted. Again, the new law aims to steer the employer in the right direction by adopting as reasonable an agreement that “protects a legitimate business interest and is limited only to the specific type of services that the employee has provided at any time during the last two years of employment.” Interests worthy of protection: The new law requires that non-compete obligations “not be broader than necessary to protect the legitimate business interests of the employer.” Legitimate business interests are defined as the employer`s trade secrets, the employer`s confidential information that would not otherwise be considered a trade secret, or the employer`s goodwill. This requirement is generally consistent with the current state of the common law. The law also states that a non-compete obligation “may be considered necessary if the legitimate business interest cannot be adequately protected by another restrictive agreement, including but not limited to a non-solicitation agreement, non-disclosure agreement or confidentiality agreement,” but does not clarify this presumption. 9. Does my employer have to pay me extra money in exchange for a non-compete clause? While many of the provisions of the Act reflect best practices with respect to enforceable non-compete obligations, some of the requirements – particularly with respect to the consideration required to support non-compete obligations – will now require employers to assess their overall non-compete strategy, update their non-compete agreements, and adapt their human resources processes to ensure the compliance with the Act […].