Non-compete agreements, or NCAs, are the main tool used by employers to protect their interests when hiring employees. They are used to limit the ability of employees to join a competitor or start a new business in the same industry after leaving the employer. NCAs are controversial, and the Federal Trade Commission (FTC) is now considering if they should be banned or not.
The Pros of Non-Compete Agreements
- Protection of Investment – Employers invest time and money in training and developing their employees. An NCA ensures that employees will not use these resources to benefit a competitor after leaving the company.
- Protection of Trade Secrets – NCAs typically include a confidentiality clause that prevents employees from disclosing trade secrets to anyone outside the company.
- Protection of Customers – NCAs protect employers from employees taking customers with them to a competitor.
The Cons of Non-Compete Agreements
- Limits Employee Mobility – NCAs can have a negative impact on employees’ ability to move freely between companies. This can lead to reduced wages for less-educated workers and limit the ability of employees to find better job opportunities.
- Overly Restrictive – Some employers may require employees to sign NCAs that are overly restrictive, hindering the employee’s ability to get a new job in their field.
- Unfair to Employees – Many employees may not understand the terms of the NCA they are signing, which can lead to unfair consequences if they join a competitor or start their own business.
While NCAs can be beneficial for employers, it is important to consider the potential negative consequences for employees. The FTC is now considering whether or not to ban NCAs in order to protect the interests of workers. The decision could have far-reaching implications for both employers and employees, and will be worth watching closely.