About 25 years ago, I enforced noncompete clauses for multiple companies and states. Many executives thought of these contract clauses as a way to retain talent.
Really? Are you not telling a new employee, "We are great! Come work for us, but If you ever leave, you will never work in your profession again."?
I always made two points with these executives.
First, suppose someone does not want to work for you, but you force them to do so. Ancient history tells us that these arrangements never end well.
Second, what is legal and enforceable varies tremendously depending on the state or city. You can try to get money or have an ex-employee fired from their new job, and, at first, you might succeed. However, judges and juries do not like it when you take away a person's means of making a living. Who are you to punish them so severely?
Now the Federal Trade Commission plans to ban noncompete clauses. They are getting a lot of pushback on the rulemaking, and some question if the courts will support an administrative rule without specific congressional approval.
The bottom line is noncompete agreements can be valuable but not for retention. If you are protecting trade secrets and customer lists, you may have a valid reason, but these clauses should be specific and rare.
This week, the Wall Street Journal published an article with some great alternatives to noncompete clauses. It would be wise to read if you are focused on retention or looking to prevent disclosure.
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