FTC rules non-compete agreements are no longer binding
The FTC has been analyzing the non-compete situation for awhile, and has finally made a ruling.
Following publication in the federal register, which should happen soon, the new rule will take effect 120 days after that. This means, at minimum, non-competes will still be in effect until at least late August, but after that they will be voided.
This includes almost all non-competes, aside from senior executives who made $151k/year or more (and had decision making power).
All other non-competes will be retroactively voided, though it appears existing or past litigation involving previous non-compete violations will not be affected. But no matter when you signed your non-compete agreement, it will become invalid, and new litigation about previous violations also presumably will not be allowed either.
This does NOT affect NDAs, which will still be allowed. This ruling only prevents companies from preventing employees from working for competitors in the same industry, or from starting their own company to compete with their former company.
I have mixed feelings about this.
It is definitely true that companies have increasingly used non-competes to underpay employees, and thwart competition regarding employees being able to leave their jobs for better pay or better conditions at competitors.
However, this also opens the door for former employees to start competing companies after learning the industry and internal secrets/procedures, thus giving themselves a leg up to compete in the future. It is not unreasonable, in my opinion, to have non-compete agreements in certain niche industries. There is always something gained by being an "insider" in a leading company in any industry. There's a balance between unfair non-competes and fairly protecting your company's interests.
I'll give you a simple example where a non-compete would be reasonable, and which will no longer be legal later this year:
Say I start a local window washing company, with an innovative new way to wash windows quickly and efficiently. However, being 52 years old, I don't want to do the manual labor, so I hire two younger guys, Joe and Mike, to do the actual washing. I teach them exactly what to do, I spend money marketing the business, and they become locally known as great window washers.
After 2 years. Joe and Mike realize that word has gotten around the area that they're the best window washers. They quit my company and start "Joe and Mike's Window Washing", and pitch that they were the ones actually doing the work for the top local window washing company for the past 2 years.
This would be LEGAL, unless I could show that they stole "trade secrets" with how to wash the windows, which would be hard, for obvious reasons.
This would be where a non-compete would make sense and be fair, such as one stating that Joe and Mike could not start their own window washing company within a 20 mile radius.
I feel the FTC should have just restricted non-competes, rather than eliminated them.