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Will your non-compete agreement soon be obsolete?

On Behalf of | Jan 25, 2023 | Employment Law

Including the right terms in your employment contracts is crucial for your business’s long-term financial protection. The people who work for your company today could take a lucrative position with your competitor tomorrow and potentially share information that can damage your company. They could even start their own business and make use of your trade secrets or their connection with your clients to build their company.

Organizations often seek to protect themselves from worker misconduct through the use of special inclusions in their employment contracts. Non-compete agreements have long been standard additions to executive contracts, and companies may have any worker who is in a position to misuse information gleaned through their employment sign a non-compete agreement.

However, the Federal Trade Commission (FTC) recently indicated that it intends to ban non-compete agreements at the federal level. Will your protective contracts soon be obsolete?

You may need to revise your employment contract

Currently, Arkansas only imposes limitations on non-compete agreements. They need to be reasonable for the courts to enforce them, but it is possible for employers to ask the courts for enforcement assistance.

If the FTC ban moves forward, it may become much more difficult to enforce your non-compete agreements in the future. Such agreements may not be worth the paper you print them on once the ban is in place. Of course, the ban at this point is nearly theoretical. There have been indications from organizations that represent businesses that they would fight this move by the FTC.

Regardless of the length of time it takes, however, some kind of action on non-compete agreements is likely in the future. Therefore, your business may benefit from adjusting its contracts before the ban goes into place. There are other restrictive covenants that you can use in your employment contracts to protect your business without having someone sign a non-compete agreement.

Employment law changes may necessitate negotiation

Obviously, your company will do its best to comply with all existing federal and state labor statute at the time that you hires someone. However, there are likely already employees at your company who are subject to non-compete agreements.

You may need to negotiate a new contract with them rather than risk having a hard time enforcing your non-compete agreement. Whether you need to take a former worker to court or review and update your contracts, you need to be aware of potential changes that could affect your company. Properly responding to changing employment laws will protect companies from worker misconduct and unenforceable contracts.