Noncompete Clauses – What You Need to Know

Noncompete clauses have become very popular in recent years. They are provisions in a contract that restrict an individual from engaging in business practices that compete with the company. These clauses are often in contracts of employees, business partners, and vendors. Understanding the implications of these clauses is important because they can affect your future career prospects. Here, we will explore everything you need to know about a non-compete clause.

What is a Noncompete Clause?

A noncompete clause is a legal agreement between two parties. These parties can be an employer and an employee, a business partner, or an independent contractor. This agreement prohibits one of the parties from competing with the other party’s business after the contract term has ended. The goal of the non-compete clause is to protect the company’s business interests.

How Do Noncompete Clauses Work?

A noncompete clause can be broad or narrow in scope. A broad noncompete clause can prevent the individual from starting any competing business during the contract term and for a certain period after it has expired. A narrow noncompete clause restricts the individual from only engaging in the same business activities as the company. Non-compete clauses can also specify geographic locations where the individual can’t compete. The noncompete clause can usually be waived if the individual is terminated from the company.

What Are the Implications of a Noncompete Clause?

If you sign a noncompete clause, you agree that you won’t compete with the company. This means that you may have to turn down job offers from your business’s competitors. If you violate the noncompete clause, the company can sue you, and they will usually win. The penalties for violating a noncompete clause include monetary damages, injunctions, or both.

Why Do Companies Use Noncompete Clauses?

Companies use noncompete clauses to protect their business interests. If you work for a company, you will likely be trained in their business practices, become privy to confidential information, and develop client relationships. Employees can take this information, compete with the company, and poach clients when they leave the company. This is why businesses like to use non-compete clauses as an attempt to mitigate this risk and help keep the company’s trade secrets confidential.

Recently, however, the Federal Trade Commission proposed a rule to ban non-compete clauses. The FTC estimates that, if approved, stopping non-compete clauses could increase wages by $300 billion per year.  It also believes that it will increase the career opportunities for approximately 30 million Americans. The FTC expects to vote on this proposed rule during April 2024.

Final Thoughts

If you are presented with a non-compete clause, it is important to understand how it may impact you. Before you sign anything, ensure you fully understand the terms and conditions of the agreement, as well as the current law surrounding this important issue. You should also seek a legal professional’s advice to ensure your rights are protected. Non-compete clauses can significantly affect your career prospects, so it is essential to approach them cautiously.

The skilled lawyers at The Bourassa Law Group can help you learn more about non-compete clauses and their regulations. We can help you every step of the way and ensure you can positively discuss employee rights. Give us a call at (800)870-8910 for a free consultation, and let’s get started.

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