Are Big Changes to Non-Compete Agreements Coming Soon?

The White House is encouraging states to make sweeping changes to the way that they handle employee non-compete agreements. This could mean big changes for the way employees move from job to job. Here’s a look at how these contracts work, and a few ideas on how some people think we could improve our laws.

What is a Non-Compete Agreement?

A non-compete agreement is a contract between an employee and a business, where the employee agrees not to accept employment at a competing company within certain agreed parameters. This can be a crucial tool for protecting trade secrets, but many workers are now complaining that these agreements are stopping them from searching for better opportunities. There are many with horror stories of not being able to find work because of an overly restrictive agreement.

How Might We Change Non-Compete Agreements?

Here is a look at just a few of potential ideas that the federal government is suggesting:

• Ban these agreements for some types of workers: One solution could be to ban these agreements for workers who are unlikely to have any trade secrets, especially if they are not especially highly paid. Some claim this could allow employees to job hop after better opportunities, while still allowing companies to protect their valuable information.
• Increase fairness and transparency: States could also create rules to try to make these agreements more fair and open to employees. Just to give one example, sometimes an employer will wait to propose the agreement until after the worker has accepted a job offer. This can be problematic, because applicants tend to have more options and bargaining power when they are still shopping for jobs. Some argue that making these adjustments would make the agreements fairer to workers.
• Encourage good behaviors from businesses: Another possibility is for states to create financial incentives for businesses to create non-compete agreements that are more employee-friendly. This could give businesses the option of making things easier for workers, while arguably avoiding any burden on businesses.

We still don’t know how states will respond to the White House’s actions. Many state governments, such as Utah and Hawaii, have already passed their own reforms on these agreements. As always, there are some disagreements about what is the best course of action. Whatever our leaders decide, the hope is that we can find a solution that protects both the interests of employees and businesses here in Texas.

Dan A. Atkerson is a Dallas employment lawyer who has expertise in issues such as non-compete agreements, employee contract claims and other workplace agreements.