The Demise of the Non-Compete Agreement

Jul 13, 2023Litigation

The New York state legislature recently proposed a bill to ban employers from obligating workers to sign the now-standard Non-Compete Agreement, or any sort of contract or provision that “prohibits or restricts such covered individual from obtaining employment after the conclusion of employment with the employer.”

Does this mean when someone leaves your employ, whatever intellectual property, trade secrets, and/or specialized knowledge they’ve amassed are free reign for the taking, off to supply your competitors, or become one of them, with everything they need to bring you down?

This law will apply to traditional employees, as well as independent contractors (a distinction many states are trying to nullify anyway) or those whose labor performed on your behalf may be quite limited, but nonetheless may grant them access to highly sensitive information about your enterprise.

Is this just an anti-employer measure meant to enable runaway corporate espionage? Well, not quite…

The Ugly Truth Behind the Non-Compete

Legally speaking, traditional Non-Competes aren’t what they’re cracked up to be, and may lead to unintended consequences.

For a long time now, the non-compete has operated more as a clumsy broadsword than the precise scalpel that’s required in matters of business confidentiality. Time and regularity of application have rendered the non-compete as we know it overbroad; both in construction and application.

They have become such a standard, widespread, humdrum step of the process, with such generic “catch-all” language, that many parties affected by them, which have included janitors and other low-wage earners, are likely left confused about just what potentially sensitive information access their positions entail, and what their post-employment options are.

Questionable Effectiveness and Efficacy, No Matter Which Side You’re On

For the employer, there may be a feeling of obligation to include non-competes in the hiring process to “CYA” and avoid a sense of paranoia for leaving them out, regardless of whether they’re actually appropriate under the circumstances. This could have bred entire generations of employers who were uncertain if they were properly implementing or enforcing them.

It can also adversely affect recruiting, by giving prospective employees the impression that they’re not allowed to leave their at-will jobs. This not only puts a strain on the individual worker, but potentially creates a market devoid of experienced subject matter experts because everyone’s afraid to quit their current job!

Employees who have actually been privy to confidential information and wished to leave the organization may feel stuck and immobile within the industry, and like they have to either stay in their position or choose a new field entirely due to fear of being sued for thriving in their next job.

Employees without such secrets, like the aforementioned janitors and others, wishing to exit the company, may fear retaliation via the weaponization of this customary superfluous form and troubling uncertainty as to exactly what would or wouldn’t constitute a non-compete violation.

In my experience, I’ve perfected better ways to make it clear that unfair competition will not be tolerated, without making the recruits feel trapped by a non-compete. Contact me, Jonathan Scott and Commerce Law Partners to learn more.

Time To Move On?

In light of the non-compete agreement’s inadequacy, in the modern era, where the protection of data, customer lists, and other intangible assets is more of a challenge and priority than ever, (as well as taking into account employment flexibility,) what’s called for is a more nuanced and tailored approach.

Every business relationship, deal, project, and initiative is unique and calls for its own set of protections and provisions. 

More customized and effective measures must be utilized to ensure information security without stifling your personnel from the possibility of seeking gainful subsequent employment elsewhere.

And if a violation is suspected, proper remedies can only be pursued and realized via measures that were put in place according to the distinct details of the case in question.

You need the right weapon for the fight, not a dull, blunt instrument for all occasions. Any employer who’s been in this position understands the anxiety of having your remedies stand or fall on the overbroad non-compete agreement.

And if all this isn’t enough to convince you, Uncle Sam’s almighty hammer is also about to drop on the illustrious non-compete agreement.

There are currently pending Federal Trade Commission regulations that may soon render the non-compete worthless everywhere, not just New York.   

For these reasons and more, over a decade ago, I saw the writing on the wall and ceased non-competes for all of my New York-based business clients. Opting for more effective measures to cover my clients against contingencies such as competitors poaching company clients.

So, in this uncertain business atmosphere of constant flux, I can bring all this experience to bear for you and your business. Get in touch and let’s discuss how to keep your organization secure and running smoothly in a post-non-compete market, because I get the feeling that’s coming soon!

Contact Jonathan Scott and Commerce Law Partners – Prepare to Win!

BOTTOM LINE:

Like it or not, the time of the non-compete form is coming to an end.

It was bound to happen, because there is no one size fits all strategy for taking precautions to protect your high-value business information. It depends on the company and the particular circumstances. Regardless of what those are, a new strategy is in order.

To weather the sunset of the non-compete and implement effective measures to protect yourself, your business, your workers, and your trade secrets, reach out and get an attorney on your side who was early to this party! Contact Jonathan Scott and Commerce Law Partners – Prepare to Win!

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