Today the Federal Trade Commission announced a long-anticipated rule change outlawing non-compete agreements for all but a very few highly compensated executive employees. It is indeed a victory not only for individuals, but for capitalism itself. For decades, employers have used non-compete agreements to squash any competition by former employees. Far from being limited to protecting trade secrets and preventing the theft of intellectual property, employers have instead used non-compete agreements to drive competitors into bankruptcy through frivolous litigation. Existing companies are, by nature, better positioned for litigation by their very existence, whereas a startup company or individual typically does not have the financial wherewithal to withstand costly litigation. Knowing this, existing companies have used non-completes for the improper purpose of eliminating competitors. As for protecting confidential and proprietary information, there already exist common laws in Texas that prevent an employee from leaving an employer and using that employer’s confidential and proprietary information in any form, and there are several federal laws now in place that also provide such protections for employers. But the proliferation of non-competes has seen employers use these agreements not to protect anything, but instead, to simply bludgeon startups and former employees into oblivion, and thereby destroy competition. Again, today is a great day for individuals and for capitalism itself, and it is long overdue.
You can find the FTC’s announcement here: https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
