Non-compete agreements are a key tool used by many small businesses to protect their interests and investments. The Federal Trade Commission (FTC) is in the process of implementing a rule that would ban all non-compete contracts between employers and employees nationwide. This rule would not only prohibit employers from entering into non-compete agreements with their employees, but would also invalidate all current non-compete agreements. This proposed rule ignores the concerns of many small business owners who utilize non-compete agreements to protect their valuable proprietary information and the tremendous investment small businesses make training employees. Thus, if this were rule were to be implemented as currently written, small businesses would lose a significant tool used to protect their interests and investments.
Protecting Proprietary Information
While working for a business it is common for employees to gain access to the business’s sensitive data or secrets, that give the employer an advantage in their respective market. This information may relate to specific formulas used in production, certain business practices and customs, marketing strategies, customer and supplier lists, insight on future products, and other private information that would make a business vulnerable if their competitors obtained such information. Non-competes are important in preventing former employees from using this information to gain an upper hand former employer in the market.
Many small businesses spend a lot of time and money training employees. This training provides employees with the skills necessary to excel in the given field. For an employee to then leave and open a business or go to the competitor and directly compete with the employer is just not equitable.
What You Can do
If the rule is implemented by the FTC as it is currently written it could cause serious harm to many small businesses. Fortunately, as is required of any rule adopted by a federal agency, there is an opportunity for the public to provide feedback to FTC before the rule is adopt and takes effect. If you would like to comment about how this blanket ban of non-competes will affect your small business, please drop us a note at Info@Ser-Associates.com and we will assist you in submitting your comment directly to the FTC.
At Ser & Associates, we regularly work with small businesses and assist our clients in drafting and negotiating their contracts to protect their interests. If we can assist you in negotiating your next contract, please contact us at 305.222.7282 or Info@Ser-Associates.com. Also, please be sure to visit us at www.Ser-Associates.com and follow us on Instagram, Facebook, and/or LinkedIn to learn more about how we can assist you and your business!