Steps to Take After a Non-Compete Issue in Georgia

In September 2024, a Federal Trade Commission ban on non-compete agreements went into effect. Although this rule is not entirely retroactive, it affects noncompete disputes.

“Non-compete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once non-competes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban non-competes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

The FTC estimates that the final rule banning non-competes will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year. The final rule is expected to result in higher earnings for workers, with estimated earnings increasing for the average worker by an additional $524 per year, and it is expected to lower healthcare costs by up to $194 billion over the next decade. In addition, the final rule is expected to drive innovation, leading to an estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years.

Non-competes are a widespread and often exploitative practice imposing contractual conditions that prevent workers from taking a new job or starting a new business. Non-competes usually force workers to either stay in a job they want to leave or bear other significant harms and costs, such as being forced to switch to a lower-paying field, being forced to relocate, being forced to leave the workforce altogether, or being forced to defend against expensive litigation. An estimated 30 million workers—nearly one in five Americans—are subject to a noncompete.

Under the FTC’s new rule, most existing non-competes for the vast majority of workers will no longer be enforceable after the rule’s effective date.

Revise the Agreement

The FTC’s rule change casts a shadow over the enforcement of existing non-compete agreements. If employees find any loopholes or weaknesses in a non-compete agreement, a court will most likely not enforce it. So, at the first sign of a dispute, reach out to a business law attorney. An attorney can revise the agreement as necessary, make it easier to enforce, and resolve the dispute before expensive legal fees mount up.

Many non-compete agreements, especially ones drafted more than five years ago, have extensive provisions. They often prohibit workers from going out on their own, unless they move to another region or even another state. A Norcross business law attorney tightens such agreements, so they pass muster under the least restrictive means test that most courts use to evaluate such contracts.

On a similar note, the agreement must be an agreement. A take-it-or-leave-it contract of adhesion is usually unenforceable in civil court. That’s especially true if the employee must sign the deal as-is to work there.

To avoid this issue, companies should offer employees the option to review these agreements before signing. Make a record of that (e.g., a memo in the employee’s file giving the worker twenty-four hours to accept or reject the noncompete agreement).

Stand Firm

If an employee breaks a non-compete agreement, don’t back down. A Norcross business law attorney can write a polite but firm letter informing the employee of the breach and the possible consequences of that breach.

The threat may be empty, given that a long court fight isn’t in the budget. But the employee doesn’t know that. A demand letter should also include a thorough review and consultation. An attorney can ensure that the contract is enforceable and review legal options if the matter goes to court.

Settle Litigation

Most civil disputes are settled out of court. Personal injury and other such matters usually involve financial settlements. But in a non-compete dispute, no money is at issue, at least in most cases.

Therefore, many companies agree to cancel non-compete agreements if the former employee signs a non-compete substitute, like a non-disclosure agreement or a non-solicitation agreement.

NDAs are based on trade secrets laws. The signatory cannot disclose a trade secret to anyone else. Essentially, a trade secret refers to any product, process, or information that a company wishes to keep confidential.

Non-solicitation agreements usually prohibit signatories from contacting company clients for a specified period. These agreements are generally subject to the least restrictive means analysis discussed above. A court would most likely throw out a permanent non-solicitation agreement, especially in the current environment.

Count on a Hard-Working Gwinnett County Attorney

Non-compete disputes are complex to resolve successfully. For a confidential consultation with an experienced business law attorney in Norcross, contact Zimmerman & Associates.