Legal Advice To Help Build Your Future

As a business owner, you can no longer use noncompete agreements

On Behalf of | May 23, 2024 | Business Law

There are many different ways that business owners try to protect their intellectual property. Some use trademarks, copyrights and patents. Others will have employees sign NDAs, or nondisclosure agreements.

One common tactic that has been used over the years is the noncompete agreement. It prevents employees from switching to competitors for a certain time after they leave their jobs. It also prohibits them from starting new businesses that operate in the same industry and could be considered direct competition to their previous employer. 

But if you are a business owner who has used these in the past, it’s important to note that you no longer can. The Federal Trade Commission has banned noncompete agreements in the vast majority of cases, with rare exceptions for senior executives who are already bound by these agreements. But for most workers, they cannot be compelled to sign noncompete agreements and they cannot be legally punished for violations.

What if the agreement is already in place?

The FTC has indeed banned these agreements moving forward, but what if workers already signed them? Do they still have to honor the agreements they made?

They do not. Again, there are some exceptions for high-level executives who may have to honor these agreements in specific situations. But a low-level employee who signed a noncompete agreement a year ago no longer has to abide by that agreement.

It’s always important for business owners to know how the law is changing. This helps them understand what legal options they have and what steps to take when setting up contracts, opening new businesses and more. It can help to work with an experienced legal team.