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FTC weighing a ban on noncompete clauses

On Behalf of | Mar 22, 2023 | Business & Commercial Litigation |

Whether you run a small or large business, you are likely to have a range of employees to help you achieve your business goals. Because protecting your business now and well into the future is paramount, this is considered with each hire and termination. Employment contracts are common practice, and the inclusion of a noncompete clause is also common.

While a noncompete clause is used as a mechanism to protect the company when and if an employee leaves, the contents of the agreement could give rise to potential business litigation. Thus, employers should be cognizant of this, understanding their legal options in matters concerning a noncompete clause.

Noncompete clauses impacting low-wage workers

As a current report highlights, noncompete clauses are found everywhere. That is even true for dancers and hair stylists. Such terms are causing financial strain and job difficulties for individuals that seek to change jobs or start their own businesses Based on the terms of the agreement, this either creates problems for the location of their job or opens them up to litigation if their past employer sues them for a violation of the noncompete clause.

While these agreements are not new, their increased use in low-wage work is. This causes some to question if they are necessary, especially in a position that involves few if any trade secrets or specialized training.

Could there be a ban on noncompete clauses?

The Federal Trade Commission has urged the current administration to make a nationwide band on noncompetes. While the FTC’s proposal has the potential to raise wages by nearly $300,000 a year, experts have little confidence in its passing. Nonetheless, research indicates that the existence of noncompete clauses presents issues in recruiting new employees or retaining current employees.

Business litigation matters concerning noncompete clauses can be complex and overwhelming. An employer should be mindful of this when utilizing these clauses or taking action for a breach in contract. Gaining a better understand of your legal rights and options could help you address current legal matters and prevent future matters from occurring.