What the FTC’s Proposed Noncompete Ban Means for Existing Contracts

Florida business owners may soon face a crossroads when it comes to retaining employees through the use of noncompete clauses or terms that operate in the same spirit of noncompete clauses. With the Federal Trade Commission (FTC) proposing a rule, there may soon be a mass exodus of employees who are seeking other employment with your competition or who are attempting to leverage this change for higher wages or more expansive benefits packages.

When the proposed rule was first announced, many got the impression that this would only impact the future use of noncompete clauses, but the text of the rule makes it clear that all current and former clauses would be eliminated, as well. This raises questions about the integrity of those contracts signed by businesses and their employees.

All Former Clauses and Similar Terms Will Be Null

As noted, this rule would impact not just future negotiations but also contracts that are currently on the books. Noncompete clauses or terms that act in a manner that limits an employee’s ability to seek employment with a competitor will be null and void.

This includes clauses that extend beyond the term of employment. If you have former employees who are still governed by noncompete clauses they signed during their tenure at your company, they will also no longer be bound by those terms.

Businesses Will Be Required to Notify Employees

Businesses will be responsible for directly contacting any employees who currently have non-compete clauses to let them know they are no longer bound to those agreements. The notice would inform them of the elimination of the clause in clear terms that can be understood by the employee so no impression is given that a noncompete clause remains in place.

The notification element of the FTC proposal extends to any employees who have terms in their contract that act in place of a formal non-compete clause, as well.

Terms Exchanged for the Non-compete Clause Remain in Place

Non-compete clauses have often been an element of an employment contract that must be negotiated. Employers will often offer certain contract provisions in exchange for the signing of a noncompete clause.

When you notify employees of this change, you would not be able to rescind those other negotiated terms. This means you will have essentially given employees a benefit in exchange for nothing once the non-compete clause is eliminated.

Work with an Attorney

Florida business owners will still have options to protect their businesses and retain employees even if the Federal Trade Commission moves forward with the elimination of noncompete clauses. At Bryant Taylor Law, we care for your business and can help you protect your business through effective legal strategy. Contact our team if you need to get ahead of this potential change and are looking for legal pathways to do so.

The following two tabs change content below.

Bryant Taylor