New Executive Orders Covering Non-Compete Agreements Employers May be Impacted
On July 9, 2021, the Biden administration introduced an Executive Order (“EO”) directing the Federal Trade Commission(“FTC”) to consider “exercising the FTC’s statutory rule-making authority under the FTC Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”
Non-compete agreements typically contain clauses that restrict an employee from going to work for a competitor for a period of time after the employment ends. Employers rely on such clauses to protect legitimate business interests.
While Ohio law allows for such agreements between employers and employees, they are scrutinized by the courts. The restrictions in the agreement must be reasonably necessary to protect the employer’s legitimate business interests and must be reasonable in geographic scope as well as the period of time the employee may not work for a competitor. Other types of clauses specifically cover a former employee’s ability to recruit an employer’s existing employees and customers to a new employer.
It is important for employers to be aware that the FTC’s rules will most likely apply to agreements that begin after the proposed new rules have been finalized and formally take effect. In light of this, employers may wish to revisit this issue and implement new agreements, as well as conduct a review of existing agreements, as soon as possible.
The attorneys at PS&E are here to help employers and answer any questions that they may have about the new EO. Please contact Kristina Curry at (937)223-1130 or firstname.lastname@example.org.