Page 18 - Fall 2024 EDM Today

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agreement and what the future may hold. EDM Today Magazine
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NON-COMPETE CLAUSES; YES…NO…MAYBE?

Non-complete clauses have been found in contracts, literally since the Middle Ages. They have a logical/common
sense origin, but how they fi t in the business world today may be more diffi cult to follow. Many of our subscribers
use and have signed such documents. In this issue, we are taking a look at the current state of the non-compete

What Is A Non-Compete
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Agreement?
Let’s start at the beginning.
A non-compete agreement, at
its most basic, is an agreement
that impacts what an employee
can do once he or she leaves
their current job. They are
often, but need not necessarily
be, part of a larger contract.
These agreements may restrict
where or for whom an employ-
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ee can work after separation
from their current employer.
Non-competes make sense
to employers who have spent
money to train and help
employees develop specifi c
skills or learn information
critical to the company’s work. However, from the employee’s perspective, the limitations of a non-compete may make
it more diffi cult for them to fi nd a new job and could also have a chilling effect on new business formation.
Isn’t There A Law About That?

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That answer is somewhat complex, and in short, may depend on where you live.
The scope and enforceability of non-compete clauses, or whether they are allowed at all, has historically been driven
by state-specifi c laws. State rules vary widely, ranging from no restrictions in some states to complete bans in oth-
ers. States in the middle may set a specifi c duration of time for the non-compete to be in effect or use them only for
employees who meet a certain annual salary threshold. Still, other states allow the use of non-compete agreements
in certain industries but not others or ban them if they restrict the rights of an employee under other laws.

Enter the Federal Agency
The Federal Trade Commission (FTC) entered into the discussion in early 2023, and rolled out a proposed Rule in April
2024. The Proposed Rule would have effectively banned new non-compete agreements, except for certain specifi c
circumstances and employees, and would also bar entry into new non-competes outside of the sale of business. In
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addition, employers would have certain notifi cation requirements as to many existing non-compete agreements.

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