FTC's controversial proposal may lead to ex-employees ransacking their ex-employers
HR leaders have until Friday to voice their concerns regarding the Federal Trade Commission (FTC)’s proposal to ban non-compete clauses.
If enacted, the ban will have a “disastrous effect” on small businesses, potentially forcing some to shut their doors and cease operations, according to employment attorney Harvey R. Linder.
“When a company, particularly a small company, loses one of its employees, it runs the risk of having that former employee (and his/her new employer) poach the company’s existing customers,” Linder, partner in the Atlanta offices of national law firm Culhane Meadows, told HRD.
“Also, the former employee can decimate the former company’s workforce by soliciting other co-workers. Small companies run the risk of losing a substantive number of customers and/or employees, and I’ve personally seen this happen where restrictive covenants weren’t in place.”
A non-compete clause, as defined by the FTC, is a contractual term between an employer and a worker that prevents the latter from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends.
The proposed rule prohibits all non-compete clauses except those entered as part of the sale of a business and requires employers to rescind all non-compete agreements currently in place, and to do so...
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