The Federal Trade Commission (FTC) recently enacted a regulation that would effectively ban non-compete agreements for almost all employers. Unless the rule is blocked by legal challenges, it will take effect on September 4.
Long Island Business News hosted a webinar on June 26, which explored the ban’s viability. Ken Novikoff, who leads Rivkin Radler’s Employment & Labor Practice Group, was featured in the webinar.
Key Points
1. The ban will have little to no effect in New York, whose courts already have been interpreting non-competes narrowly, regularly not enforcing them. Judges don’t want to deprive people of the ability to make a living.
2. A primary purpose of a non-compete agreement is to give the employer, which will often be losing a client-facing employee, time to secure its relationship with its clients so as to avoid losing business to the departing employee who will likely be joining a competitor. Employers can still protect themselves through carefully tailored “non-solicitation of client” agreements.
3. There may be workarounds to the ban, such as paying an employee significantly more at the beginning of their employment for entering into a non-compete agreement. Another workaround is to give an employee their regular salary and benefits for a period of time to sit on the sidelines after they have been terminated.
4. While Ken believes that the FTC’s ban will be struck down. New York State will likely promulgate legislation in the next session enacting a similar ban.
