Employees in Texas may have heard that noncompete agreements were banned by the Federal Trade Commission (FTC). A noncompete agreement typically says that an employee who signs the document cannot directly work for the competition in the same geographical area or immediately after quitting their job. They either have to take a job in another area or work in a different industry.
It is true that the FTC attempted to ban noncompete agreements and briefly issued a rule saying that they could no longer be used and would not be enforced, in most cases. However, a court in Texas challenged this rule. The Federal Trade Commission was going to appeal it, but later decided to drop the appeal and determined that they would vacate the rule entirely. This means that noncompete agreements can once again be used.
Why would a business owner ask you to sign a noncompete?
If your employer asks you to sign a noncompete, there are many potential reasons they may cite. It helps to maintain the workforce and keeps employees from jumping to the direct competition without warning, for example, which can feel restrictive to you as an employee, but is helpful for your employer.
A noncompete can also help to protect intellectual property rights. Employees who have access to sensitive information cannot immediately take that information and run to the nearest competitor.
That said, there are also other ways to address these issues. Competitive compensation packages can help to maintain the workforce. Other types of intellectual property protections, such as trademarks, copyrights or non-disclosure agreements, can also keep sensitive information safe.
Since companies can once again use noncompete agreements, it is important for employees to understand exactly what legal options they have the potential ramifications when signing any employment contracts.