The Federal Trade Commission has issued a rule banning noncompete agreements, but businesses and managers can take their time to review existing employment agreements as legal challenges are likely.
Companies are urged to reconsider their employment agreements and think about alternatives for new hires. These alternatives may include non-solicitation agreements and additional compensation for employee loyalty. Some legal experts believe the new rule may not take effect, but businesses should still prepare for potential changes in noncompete regulations at the state or local level.
A recent survey revealed that many employers are already reducing their use of noncompete agreements due to legislative and regulatory activity. Some states have already prohibited or placed restrictions on noncompetes, prompting businesses to explore other legal means for safeguarding trade secrets and customers.
The FTC's final rule includes exceptions for certain noncompetes, such as those related to the sale of a business and high-earning senior executives. If implemented, the rule would impact millions of Americans and businesses.
Business groups argue that noncompetes are crucial for fostering growth and innovation, and legal challenges are expected to postpone the rule's enforcement.
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