Extract from Jared Coseglia’s article “The FTC’s New Noncompete Rule Does Not Solve the Real Challenge Ediscovery Business Development Professionals Have When Changing Employers”
On April 23, the Federal Trade Commission (FTC) unveiled a pivotal new rule aimed at abolishing noncompete clauses in employment contracts. This bold move is poised to catalyze the creation of new businesses, enhance job mobility, boost worker earnings and ignite innovation across various industries, including ediscovery.
Here’s a breakdown of the new rule, its implications and what it means for the ediscovery job market—particularly for hiring managers and sales professionals.
The FTC’s final rule outlaws noncompete clauses. If it goes into effect as written after the 120-day waiting period, it will free nearly 30 million Americans from existing contracts that restrict their employment mobility. The rule is retroactive, encompassing almost all current noncompete agreements except for those pertaining to certain senior executives. From Aug. 22, 2024, onward, employers will be prohibited from drafting, entering into or attempting to enforce any new noncompetes, even for senior executives.
What the Rule Doesn’t Say
It’s crucial to note that the ban does not extend to other forms of employment restrictions like nondisclosure agreements (NDAs) and nonsolicitation agreements. These instruments will continue to serve as viable legal tools for businesses to protect trade secrets and maintain their competitive edge in the marketplace. Without the threat of noncompete litigation, organizations are likely to more closely scrutinize any potential breaches of other employment covenants.
