Non-compete clauses are common – and arguably necessary – in some industries to prevent executives and people with unique talents and knowledge from going to a direct competitor of their former employer when they leave and giving them an advantage, perhaps based on work they did or skills they honed in their previous job. These clauses may include verbiage about not sharing proprietary information as well.
A non-compete clause has to be reasonable and fair in the limits it places on employees when they leave as far as time and geography. People need to be able to seek new employment to support themselves and their families or be compensated so that they don’t need to work for a time.
Limitations on when these requirements can be placed on former employees
Non-compete clauses, however, have become overused – often financially harming those who are already barely making ends meet. Some fast-food companies, for example, have held low-wage workers to non-compete requirements when they leave so that they can’t go work for another fast-food business without risking legal action.
That’s why the Federal Trade Commission (FTC) has proposed a new rule that would limit or prohibit the use of non-compete clauses unless they’re necessary for an employer and don’t unduly harm an employee’s ability to seek work after they leave a job. The agency is still seeking comment on the proposed rule.
Some state laws have already drastically limited the use of non-competes
In the meantime, a number of states across the country from California to Virginia have gotten out ahead of the federal government in prohibiting nearly all non-competes or limiting them to higher-paid employees. Mississippi is not among them. However, if a business in Mississippi has employees in another state, it’s crucial to know that state’s laws.
It’s also wise to be cautious about any non-compete language a company may place in any employee contract to help ensure that it will hold up in court if it’s challenged. That’s just one reason why having experienced legal guidance is crucial to minimizing costly and potentially reputation-harming legal actions while still protecting business interests.