The End of Non-Compete Clauses?

by Dave Holloway

This week, the Federal Trade Commission (FTC) proposed a sweeping ban on these non-compete clauses in employment contracts in the U.S.

Non-compete clauses are a common component in many employment contracts. In most simple terms, a non-compete clause prohibits an employee from leaving his or her current company and working in the same industry (and geographic area) for some period of time. These clauses can make life incredibly difficult for employees who want to leave their current employer.

In support of the proposed ban, the FTC points to research that indicates that non-compete clauses hurt wage growth, as often times one of the best ways to secure a raise is by leaving for another company. The Commission says that banning non-compete clauses may raise overall wages by nearly $300 billion per year, and create better job opportunities for nearly 30 million Americans. In theory, banning these non-compete clauses could provide workers with more job opportunities, making it easier to either leave one’s job, or use the threat of leaving as leverage in negotiations.

In practice, litigating non-compete clauses can be difficult. From a legal perspective, the Courts will be looking to whether the restriction is reasonable with regards to both time (e.g. how many years does the restriction last) and geography (e.g. radius that you could not work within — like 2 miles). On a more personal level, individuals often don’t have the resources to compete with larger companies/organizations, which makes litigating these issues even more daunting, thus giving another advantage to the employer.

If you have a non-compete clause in your employment contract and would like to understand how it may affect you, call or email Dave Holloway today.

To learn more about the FTC’s proposed ban on non-compete clauses, visit here.