How can you protect your business without noncompetes?

On Behalf of | Jun 27, 2024 | Civil Litigation

Noncompete agreements have been one of the main ways that companies have sought to preserve their competitive advantages and protect their proprietary information and trade secrets.

Recently, it was estimated that, at any given time, roughly 18% of workers in this country were subject to noncompete agreements. Unfortunately for many employers, there’s been a lot of pushback against the practice, which many say unfairly restricts free enterprise and unduly limits many workers from earning a living. 

As of April 23 of this year, the Federal Trade Commission issued a final rule banning the vast majority of noncompetes around the nation – including those already in existence. While the new rule has yet to be put into place and is facing legal challenges, it’s likely to become effective before the end of this year.

It’s time to pivot to other options

If you’re running a business, you may want to look at other ways you can protect your company from former partners, employees and contractors who may hold a grudge or want to piggyback off your success in some way. Here are some suggestions:

  • Nondisclosure agreements (NDAs): These prevent someone from disclosing your company’s confidential information or trade secrets to third parties, and can be used to protect sensitive information such as proprietary systems or technology, marketing strategies and more.
  • Nonsolicitation agreements: In some industries, protecting your client list is a key business strategy. In others, you want to keep key employees with specialized skills from leaping to a competitor. Nonsolicitation agreements can help you stop former partners or employees who have started their new companies from “poaching” your clients or team members.
  • Garden leave provisions: It may sound strange to pay someone to do nothing, but if you operate in a field where the data and systems change rapidly, this may be the best option to mitigate the risk when a valued, high-level employee leaves. This requires the departing employee to sit out a waiting period (while being paid) before they can move on. 

Given the latest challenges in the business environment, it may be wise to discuss your legal options with someone so that you can fully protect your future.