On Tuesday, the FTC announced a rule that will ban noncompete agreements nationwide. What should you do?
Nothing, at least for now. Except cue Alan Jackson:
Pour me somethin' tall an' strong
Make it a Hurricane before I go insane
It's only half-past twelve but I don't care
It's five o'clock somewhere
The FTC rule banning noncompetes does not go into effect until 120 days after it has been published on the Federal Register. Experts expect the rule to be published in a few days. Time is on your side, someone famous once sang.
Experts also expect a court to stop the new rule from being enforced. Lawsuits have already been threatened. Somewhere someplace soon, look for a federal district judge to enter an order staying enforcement of the new noncompete rule.
In the meantime, we recommend taking a look at your noncompete agreements to ensure they protect your business.
- Does your agreement prohibit solicitation of employees and customers? The FTC rule allows non-solicitation provisions.
- Does your agreement protect your trade secrets? The FTC rule allows this.
- Does your agreement protect your confidential information? The FTC rule allows this.
- Make sure your agreements have a severability clause. If the FTC rule goes into effect, a court may enforce non-solicitation, trade secret and confidentiality provisions, even if it refuses to enforce the noncompete.
In Tennessee, like many states, noncompetes have to be properly drafted to be enforced by a court. If you are serious about ever wanting to enforce noncompete, nonsolicitation or confidentiality provisions against an employee that stabs you in the back and goes to work for a competitor, spend a few hundred dollars with a good attorney to make sure your agreement is enforceable.
Spending time with your attorney is particularly important if noncompete agreements are banned. You can still stop an employee from stealing your clients, taking your staff and pilfering your trade secrets when they go to work for your competitor.
Breweries, distilleries, wineries and wholesalers have successfully enforced noncompete, non-solicitation and confidentiality provisions for skilled manufacturing and sales job positions. Noncompetition, non-solicitation and confidentiality agreements can play an important role in protecting your business, if for no other reason than keeping honest employees honest.
Keep your eyes peeled for more news about the FTC rule and federal efforts to regulate noncompetes. If implemented, the FTC rule will require changes.