Earlier today, the Federal Trade Commission (FTC) announced that it had voted to essentially ban all non-compete agreements in the United States. Specifically, the FTC issued a final proposed rule banning new non-competes with all workers, including senior executives, and rendering unenforceable any pre-existing non-competes for workers who are not senior executives. More information is available in the FTC’s press release, a fact sheet, and the text of the proposal rule, which is not to be effective until 120 days after it is published. According to the FTC’s press release, the rule will “promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.” For example, the FTC estimates that banning non-competes will result in an “estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years.”
So how should companies protect their intellectual property, confidential information, and trade secrets going forward? Well first, no changes need to be made unless and until this rule becomes final and enforceable (it will be challenged). Second, companies can and should continue to utilize confidentiality agreements, non-solicitation agreements, non-disclosure provisions, intellectual property assignment provisions, and other types of restrictions aimed at protecting their legitimate business interests.