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Now that the FTC has axed non-competes, what can I do?

On Behalf of | Jun 17, 2024 | Employer Law (Employer)

On April 23, 2024, the Federal Trade Commission issued a landmark rule effectively banning non-compete agreements nationwide. This rule has profound implications  for employers, including those in Pennsylvania, where non-compete agreements were previously enforceable under specific conditions.

Impact on Pennsylvania employers

The new FTC rule prohibits employers from establishing new non-compete agreements and from enforcing existing ones. For Pennsylvania employers, this FTC rule fundamentally alters the landscape. Non-compete agreements have long been a popular method for protecting business interests. With the prohibition in place, employers need to seek alternative methods to safeguard their trade secrets and maintain a competitive edge.

Alternatives to non-compete agreements

Fortunately, there are several viable alternatives to non-compete agreements that Pennsylvania employers can consider. The most commonly used one is the Non-Disclosure Agreement. NDAs can protect trade secrets and confidential information without restricting an employee’s future employment opportunities.

Similar to NDAs is the Confidentiality Agreement. These are designed to protect proprietary information by prohibiting the sharing of confidential data.

Other alternatives

For those employers worried about losing their customers and people, there is the Non-Solicitation Agreements. These agreements stop your former employees from attempting to take your clients, customers or other employees.

If you are worried about high training expenses, then a Training Repayment Agreement may be appropriate. Employees agree to repay training costs if they leave the company within a specified period, which helps protect the investment in employee development.

Finally, for those employers that are worried about an adequate notice period, the Garden Leave Clause is an option. Under these clauses, an employee who has given notice (for instance, two weeks’ notice) cannot work for a competitor during the notice period. This prevents employees from immediately joining a competitor or starting a competing company.

Compliance with Pennsylvania employment laws

Pennsylvania employers must also adhere to state-specific employment laws. For example, state law prohibits discrimination and retaliation and ensures employees’ right to access their personnel files. Additionally, employers must comply with federal laws.

The FTC’s ban on non-compete agreements presents new challenges for Pennsylvania employers. Nonetheless, there are several strategies available to protect business interests effectively.