In April 2024, The Federal Trade Commision (FTC) announced a rule that will go into effect in the next few months (120 days after it is published) that bans non-compete agreements and clauses in nearly all post-employment contexts.

That means that if you have one in an employment agreement or independent contractor agreement, they will no longer be enforceable except in a limited number of circumstances.

Some of the exceptions are for Senior Executives at a company and a few other instances, but for most everybody out there, you’re now non-compete free.

According to the official FTC website announcing the ban, “Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once non-competes are banned.”

“The FTC’s final rule to ban non-competes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

As a business owner or service provider, you might be wondering how this ban could potentially affects you and your business, so in this blog post I’ll be covering the original purpose of non-competes, the pros and cons of the ban, and most importantly, alternative ways to protect your business without using non-competes.

The Original Purpose of Non-Competes

Non-compete agreements are legal contracts designed to protect the interests of businesses primarily by restricting an employee from working for a competitor or starting a competing business within a certain geographical area and for a specified period after leaving the company.

The main purposes of a non-compete agreement include:

• Protection of Trade Secrets – help ensure that proprietary information, trade secrets, and confidential business practices are not disclosed to competitors
• Retention of Client Relationships – prevents former employees from taking clients or customers to a competing business
• Investment Protection – companies invest time and resources in training employees, so non-competes aim to protect this investment by reducing the risk of employees taking their skills and knowledge to competitors
• Business Stability – they provide stability by reducing the likelihood of key employees leaving to join or establish competing businesses, which can be disruptive
• Encouragement of Innovation – by protecting intellectual property and business practices, non-competes can encourage companies to innovate without fear of immediate imitation by competitors

For many business owners, non-competes are attractive because of the protection they can provide, however, as an employee non-competes often feel overly restrictive and unfair in terms of their ability to find new employment and advance their careers.

It’s for that reason that the FTC took action so that employees are not limited to new career opportunities or even new business ventures when or if they decide to leave a company they work for. 

To really understand this new ruling, let’s get into the pros and cons of the ban. ⬇️

The Pros and Cons of Banning Non-Competes

Like any new law or ruling, there are of course some pros and cons.

Pros of Banning Non-Compete Agreements

• Increased Worker Mobility – employees now have greater freedom to switch jobs, pursue new opportunities, and advance their careers without legal restrictions. This could lead to better job matches and higher overall job satisfaction.
• Enhanced Innovation and Competition – without non-compete clauses, employees can share their expertise and ideas across different companies, fostering innovation and competition in various industries
• Higher Wages and Better Benefits – greater job mobility can lead to increased bargaining power for employees, potentially resulting in higher wages and better benefits as companies compete to attract and retain talent
• Economic Growth – by promoting a more dynamic labor market, banning non-competes could stimulate economic growth by making room for new businesses

Cons of Banning Non-Compete Agreements

• Protection of Trade Secrets and Other Intellectual Property – as mentioned above, non-compete agreements help protect sensitive business information and  without them, companies might struggle to safeguard trade secrets, proprietary methods and other IP potentially leading to economic losses and reduced incentives to invest in innovation
• Retention of Talent – without non-competes, businesses could potentially find it more challenging to retain top talent, as employees might be more inclined to leave for competitors. This could disrupt operations and lead to higher turnover costs.
• Investment in Employee Training – it’s no secret that companies invest significant resources in training employees. Previously, non-competes helped ensure that this investment was not immediately transferred to competitors. With the ban, employers may feel less inclined to invest in extensive training.
• Legal and Contractual Challenges – with the non-compete ban, there’s a good chance that legal complexities and challenges will arise as companies seek alternative methods to protect their interests, potentially resulting in a surge of litigation or the creation of new contractual strategies that could still limit worker mobility indirectly.

Since the non-compete ban is our new current reality as business owners and service providers, it’s important to understand additional ways that you can protect your business. 

Because after all –  you’ve worked hard to create what you have and it’s only right that you have additional options! ⬇️

Alternative Ways To Protect Your Business Without Using Non-Competes

Since you can no longer legally use non-compete agreements in your business, it’s important for you to know that you STILL have options.

As your lawyer bestie, here’s what I suggest:

Use Non-Disclosure Agreements (NDA) for all employees, contractors and vendors

A non-disclosure agreement is the next best thing to a non-compete in my opinion! An NDA, also known as a confidentiality agreement, is a legal contract between parties that outlines the confidential material, knowledge, or information that the parties wish to share with each other for certain purposes, but wish to restrict from wider access.

In this instance, the main purpose of an NDA would restrict an employer from sharing sensitive information of a company or business in which they were formerly involved with.

The best part? You don’t have to draft this agreement yourself! I’ve got a template to make it easy for ya.

Include Non-Solicitation Clauses in your Independent Contractor and Employment Agreements

A non-solicitation clause is a provision typically included in employment contracts or other business agreements that restricts one party from soliciting the other party’s employees, customers, or clients for a specified period after the termination of the agreement or employment.

The primary aim is to protect the business interests and relationships of the company by preventing former employees or business partners from taking advantage of connections and contacts established during the course of the relationship.

So, even though you can’t enforce a non-compete, you CAN ensure that your hard earned client base isn’t sought after for a certain period of time.

Insert Exclusivity Clauses into Brand Influencer Agreements or other appropriate contracts

An exclusivity clause in a contract is a provision that restricts one or both parties from engaging in specific activities with third parties for the duration of the agreement (normally in exchange for additional consideration or higher rates). This clause is often included in various types of agreements to ensure that the parties involved commit exclusively to each other for certain services, products, or business dealings.

A clause like this is SUPER important for brands or companies using influencer or affiliate marketing to ensure that the creators you hire aren’t also promoting similar products and services as yours.

Copyright ALL of your content

The best and most simple way to protect your brand and business? Make sure EVERYTHING is copyrighted.  

And yes, I really do mean everything. If you’re a business owner or service provider in the online space, there’s a good chance that you have LOTS of digital assets beyond just your website. Things like lead magnets, workbooks, slide decks, training videos, etc. 

ALL of those things need to be copyrighted in order to fully protect yourself from copycats in the online world – because trust me, there are lots of them out there. 

CLICK HERE to learn more about the ins and outs of copyrighting your content and then CLICK HERE to grab the free Copyright Notice for Digital Products.

Trademark your brand name, signature methods, frameworks, products and offers

The next best way to protect your brand and business beyond copyrights is to trademark your name, signature methods, product and offer names, etc. 

Trademarks serve multiple essential functions in business operations, but primarily act as distinctive symbols that consumers associate with specific goods or services, facilitating brand recognition, and fostering trust among customers.

They offer legal protection, shielding brands from unauthorized use or infringement by others, which helps prevent consumer confusion by ensuring that people can easily identify the source of products or services and make informed purchasing decisions.

For a closer look at how to navigate trademarks for your small business, CLICK HERE!

Overall, the FTC banning non-competes can feel disappointing as a business owner, but the reality is that there are plenty of other ways to protect yourself, your brand, and everything you’ve built. 

Through implementing the alternative methods outlined above, you can feel 100% confident that you are protected as much as possible!

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If we haven’t had the chance to *virtually* meet yet, hey I’m Amber – not a regular lawyer, but a cool lawyer that helps online business owners sell without getting sued. 

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