A non-compete agreement is designed to protect an employer. If an employee signs it, they can’t work for the competition – or start another business that is the competition – for a set amount of time after leaving their job.
This has always been a bit contentious. In some states, courts won’t uphold noncompete agreements. In other cases, employers may complain that employees have violated these agreements, only for the courts to rule that the agreements were too restrictive.
But now the Federal Trade Commission (FTC) may take things a step further. Earlier this year, they proposed a new rule that would entirely ban non-compete agreements. Employers would need to stop using them and even employees who signed them would not be bound by those agreements.
Why could this change happen?
According to the FTC, non-compete agreements can be harmful to employees and for competition. They clearly reduce the amount of competition in the market, as that is their fundamental goal, which may help to keep prices higher for consumers. They can also severely limit the job opportunities that a person has. If they have a non-compete agreement and aren’t getting a raise, for instance, they can’t go to another employer to see a pay increase. They are stuck.
This change hasn’t happened yet, so some employers may still use non-compete agreements. But it’s very important to understand that this could occur and that the process is underway. Both employers and employees need to be well aware of any changes to these laws and how they may impact their employment rights. This is particularly true in the health care industry, where medical professionals often change jobs or go on to form their own businesses.