You have probably heard that non-competition clauses and non-competition agreements are becoming increasingly tough to enforce in many states. However, the Federal Trade Commission (“FTC”) recently proposed legislation that would make any non-competition agreement or clause completely unenforceable throughout the country. If this legislation were enacted, it would have widespread impacts. As this situation continues to progress, we want to keep you informed and prepared.

Does this apply to my Agency?

If you have employees, contractors, or even work with interns – yes, this applies to you. Unless you are a bank, federal credit union, or a certain type of non-profit (contact your attorney to evaluate), you are in the class of impacted businesses.

Would the new law impact existing agreements, or just prevent us from putting new ones in place?

As it is written, this law is retroactive. This means that any non-competition clauses you have in place would no longer be enforceable – no matter how well-written they are!

Is this definitely going to happen?

Not necessarily. The “comment period” is set to begin on March 10, and the public will have an opportunity to present their thoughts and arguments as to whether or not the proposed rule should be enacted (as well as potential amendments to the rule). There will also likely be additional challenges to the rule’s enactment outside of the comment period, which would cause further delays. It is unlikely that the rule would be enacted in 2023.

What if the FTC’s proposed rule is enacted? How can I protect my Agency’s business?

There are still a number of measures you can take to protect your business in light of the proposed rule, here are our top three recommendations:

• Confidentiality Agreements. Utilize confidentiality clauses and non-disclosure agreements. While the proposed law would allow someone to compete with you, existing “unfair competition” laws would still prevent them from using your own confidential information to compete with you. Having a strong non-disclosure agreement and additional confidentiality provisions in place with your employees, contractors, vendors, and anyone who could compete with you is imperative to protecting your trade secrets and information. Remember – these agreements should be signed at the starting gate before any valuable information is disclosed.
• Non-Solicitation Agreements. The second key way you can protect your business is through a non-solicitation clause or agreement. These clauses would still be enforceable and, when drafted properly (consult your attorney) and they would prevent an employee, client, vendor, contractor, etc. from taking your clients and members of your team.
• IP Portfolio. Lastly, build a strong IP portfolio. Secure federal trademarks on your name, logos, and other valuable brand elements. Protect your content by maintaining it as a trade or secret of by submitting works to the U.S. copyright office for registration. Ensure that all of your contracts contain clauses clearly delineating what belongs to you. If you dominate the field with a well-established IP portfolio, you give your competitors less room to play.

For clarification – what’s the difference between non-solicitation and non-competition?

Non-solicitation = Nobody can take your clients OR your team members.

Non-competition = Nobody can set up shop in your field or take a job with a competitor and compete with you in the marketplace.

OK, I’ve got it. So what should I be doing RIGHT NOW to protect my Agency?

First, ensure that your agreements contain solid confidentiality clauses and non-solicitation clauses. If any of your team members, vendors, clients, or contractors have not signed one, consider whether it would be beneficial to have them agree to one now. Talk to your attorney to understand your options.

Second, evaluate your team from a practical perspective. Ask yourself the following questions:

• Do a lot of people have access to non-confidential resources and trainings that they could then use to compete with you? If so, do all these people need access?
• What is your onboarding procedure like? What contracts do your employees sign? What about clients and vendors?
• Do you have good record keeping in place for your non-disclosure and non-solicitation agreements?
• If someone has you sign their contract, do you check for confidentiality and non-solicitation clauses?
• Are there any non-competition agreements you are truly depending on right now? If so, consult your attorney to see how you can take preventative measures regarding these unique cases.

Last, subscribe to this newsletter! As this rule moves through the enactment process, we will be watching for any major updates that impact you as an agency.