Navigating the Proposed Elimination of Employee Non-Compete Agreements

Gray Reed
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Gray Reed

If you have been around Texas construction in the past decade, you’ve no doubt heard about a foreman shopping his crew around. You’ve probably worried about a key superintendent or project manager taking his skills to your competitor. Maybe you have lost sleep over an estimator with a LinkedIn profile that says he is immediately open to a new job.

One tool historically used by employers in multiple industries, including construction, to mitigate against job-hopping employees is the non-compete clause. If you are a contractor and you use “non-competes” as a tool to help with employee retention, it is time to think about a visit to Home Depot. You may need another tool.

Early this year, the Federal Trade Commission published a proposed rule that would effectively eliminate non-compete agreements and void existing ones. Gray Reed’s Employment Group answers questions about the proposed new rule in this Employment Alert.

Key Takeaways:

  • The proposed rule also prohibits constructive non-competes – other terms in an employment agreement that are so restrictive that they effectively amount to a non-compete like an overly broad non-disclosure requirement.
  • It’s a proposed rule, not a rule. The FTC will receive comments on the proposed rule through mid-March 2023, unless the period is extended. Industry comments will have to be considered and addressed before a final rule is issued.
  • Uncle Sam will do something with non-competes or at least try. The final rule will likely be challenged in court so it will take a while before we know what that really looks like.
  • While the final rule is currently unknown, wise contractors will start thinking about new, better ways to retain key employees than the use of broad non-compete and non-disclosure agreements.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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