CDF Partners Dan M. Forman and Ashley A. Halberda recently authored the article "How Employers Can Safeguard Trade Secrets In The Absence Of Non-Compete Agreements" for HR.com's October 2024 HR Legal & Compliance Excellence publication.
EXCERPT:
"Three federal district courts weighed in on the enforceability of the Federal Trade Commission’s (“FTC”) ban on non-compete agreements that was set to go into effect on September 4, 2024. One court refused to enjoin the FTC’s non-compete ban (Eastern District of Pennsylvania, ATS Tree Services, LLC v. FTC), one court granted a limited injunction only applicable to the plaintiff’s employer (Middle District of Florida, Properties of the Villages, Inc. v. FTC), and, of widest impact, a nationwide injunction against the FTC’s non-compete ban was ordered (Northern District of Texas, Ryan LLC v. FTC). As a result, at least as of now, the FTC’s non-compete ban is not in effect.
Employers have some relief from a national ban on non-competes in employment, however, they should be aware that state and federal efforts continue afoot to ban and/or limit the use of non-competes in employment relationships.
1. Check Applicable State Laws Before Using a Non-compete
Many state laws ban non-competes or impose significant restrictions on restraints on employee mobility.
Recent California law expressly prohibits employers from entering into non-compete agreements with employees. A non-compete agreement is considered to be unlawful competition in California that exposes the employer to liability for damages and attorneys’ fees. California required employers to have notified employees who had signed a non-compete that it was not enforceable. North Dakota, Minnesota and Oklahoma have similarly banned non-compete agreements. Notably, while the language of many statutes refers to “non-compete” agreements explicitly, employers should conservatively extend such laws to non-solicitation agreements.
Other states permit non-compete agreements, but require a “reasonable” limit in time, scope of competition and geographical scope. For instance, Texas and Florida require restrictions to reasonably protect a legitimate business interest. Reasonableness is determined on a case-by-case basis rendering compliance difficult for employers, especially multi-state employers who face different standards and tests in different states."
Click here to continue reading the article.
Related Attorneys:
Dan Forman
As Chair of the Unfair Competition & Trade Secret Practice Group, Dan M. Forman’s knowledge expands beyond employment law to the prosecution and defense of complex matters arising from the protection of trade secrets, and…
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Ashley Halberda
Ashley A. Halberda advises and represents clients in matters involving California labor and employment law. During her years of practice, Halberda has gained extensive experience in representing employers before state, federal…
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