Non-Compete Clauses Banned: Updated Contract Templates for PIA Members
By: Pete Hanson, CAE, CISR | PIA Executive Director
On April 23rd, the Federal Trade Commission approved a new regulation banning most U.S. employers from utilizing non-compete agreements. Not only will current non-compete agreements become invalid, but employers will have to notify employees in writing that those agreements are no longer valid.
PIA and many other business groups lobbied against this rule, and it faces immediate legal challenges by the U.S. Chamber of Commerce and others. If these challenges are not successful in delaying implementation, it will take effect on August 22, 2024.
If this rule does take effect, there are some work-arounds that can be used:
- Instead of non-compete clauses, you can use non-solicitation clauses that restrict departing employees from going after your customers or employees for a period of time.
- Non-disclosure agreements can still be used to protect trade secrets.
- Upon the bona fide sale of a business, a non-compete clause can be used to prevent the prior owner from immediately opening a new business to compete with the one he/she just sold.
- There is a limited exception for executives who earn more than $151,000 per year and have policy-making authority. Current “non-competes” with those employees can still be enforced, but new agreements cannot be made.
PIA of Wisconsin has sample producer contracts that have been modified to eliminate language that violates the new rule. They are free for members to download from the InfoHub under the Resources' Employment Agreements" folder.
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