It’s 11pm, do you know where your noncompete is?
Many of us, 1 in 5 American workers, signed a noncompete when we accepted our last job offer. It was presented to us as a condition of employment, and described what we could work on, who we could work for, and who we could sell to for a certain time period after leaving the company.
We signed, filed it away and haven’t thought about it since. Except that now we’re being courted for a job with a competitor and our noncompete may preclude us from accepting the offer. Shoot, where was that paperwork again?
Noncompetes have been in the news recently since the Federal Trade Commission announced its intention in January to pursue a nationwide ban on noncompetes. Currently, a handful of states (Colorado, Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island, Virginia, and Washington) have prohibited noncompetes, often for higher-salaried roles. The federal ban would impose a much broader scope. If it passes, employers would need to rescind all active noncompete agreements, regardless of when they were signed.
Sounds like good news right? Well, it depends which side you’re on.
Workers want the right to move freely to jobs within their expertise field, without being shackled by industry, geography or customer restrictions.
Employers created noncompetes as a means to protect their business interests. Especially if you’re seeing patients, designing or selling products, they don’t want you to take their trade secrets or customers and set up shop right down the road.
All of this sounds reasonable, but somewhere along the line, noncompetes became overreaching. Once the domain of “high-skill, high-paying jobs like in technology, pharmaceutical or manufacturing where breakthrough developments are important,” noncompetes have been extended to jobs ranging from security guards to hairstylists, with terms so broad they significantly impede workers’ ability to find jobs in their fields. And this is where Biden and the FTC have stepped in, to assess whether noncompetes inhibit the free movement of talent.
What Does This Mean To You?
OK, so when could this go into effect? A vote isn’t expected until April 2024 at the earliest, but many took it as a positive sign last week when National Labor Relations Board’s General Counsel released a memo declaring that most noncompete clauses violate the National Labor Relations Act (NLRA).
Your noncompete could be voided next year, or at minimum re-evaluated. A broad federal ban may be too damaging to employers. Many groups, including SHRM, are advocating to keep legislation at the state level. Whatever the outcome, it’s likely to be at least a year before we have clear guidelines on the books. So you’ve got to hold onto your noncompete for a bit longer.
The important thing to remember too is that even if the noncompete ban is passed, you’ll still be obligated to the non-disclosure and non-solicit parts of your employment agreement, e.g. You can’t abscond with the recipe for the secret sauce or encourage your co-workers to leave with you. Where we’ve seen most employees get into trouble is when they’ve tried to interpret their noncompetes themselves. There’s a reason companies have legal counsel to draft up these documents, and you or I shouldn’t try to infer the meaning without an employment attorney.
Finally, it goes without saying that things can get hostile and expensive quickly, even if eventually decided in your favor. So, if you’ve got a great job offer in front of you, but it may be limited by your noncompete, here are some simple things that you can do to stay out of hot water.
1. Know your noncompete. Revisit the agreements you signed with your employer and understand your obligations. If anything is unclear, it’s wise to get an employment attorney to look at it. Certainly bring it up early in conversations with prospective employers and be prepared to show them your current noncompete agreement. Failing to disclose these details, knowing it may restrict you in performing your job is no bueno.
2. Return all company property so there can be no ambiguity about whether you had access to sensitive data after you start your new job.
3. Respect your NDA. Don’t disclose any company work that is not already in the public domain. We’ve seen well-meaning candidates stumble here: Presenting a case study or industry findings that have not been published. Sharing confidential details about marketing plans or spending. As a general rule, produced work that your employer has made available on their web site or in press releases is safe to talk about, including mentions of clients, campaign results, etc. If you’re uncomfortable giving an answer or a work sample, say that information is confidential and you can’t provide those details. 99% of the time, employers ask for these as evidence of success or your agility in conveying your ideas. They don’t care about the actual numbers or names, so consider alternate ways to address their questions, e.g. We were able to reduce customer acquisition costs by 25%.
4. Act with integrity/Exercise good judgment. If it feels slimy or opportunistic, then go with your gut. Downloading customer contact data or persuading others to leave the company with you will not end well. A good litmus test is whether your actions would damage your former employer. Legal considerations aside, you want your sterling reputation to endure.
Additional Resources
Here’s some good background if you want to dig deeper.
The FTC proposes banning noncompete agreements, Axios
Noncompete Clauses Violate Labor Law, WSJ
FTC Proposes Rule to Ban Noncompete Clauses, FTC
SHRM Objects to Banning Noncompete Agreements, SHRM
FAQs About the FTC’s Proposal to Ban Non-Compete Agreements, Fisher Phillips
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