If non-competes are gone, what’s next?

Business woman reviewing paperwork outdoors

Protecting against intellectual property theft and unauthorized disclosure of confidential business information has always been an important practice for businesses, yet the continuing evolution of the labor market post-COVID has increased the risk of intellectual property loss due to employee mobility and remote work. Employers have traditionally turned to non-compete, non-solicitation, and confidentiality agreements to mitigate this risk. But, as noted in a recent article by McAfee & Taft attorney Phil Bruce, the Federal Trade Commission proposed a rule to ban non-compete agreements among employers and employees which, if passed, may also affect how employers can use non-solicitation and non-disclosure agreements with employees. Other federal agencies like the National Labor Relations Board have also expressed their intention to challenge non-compete agreements.

Non-compete agreements are already restricted under Oklahoma law, but the FTC’s proposed rule would make it unlawful for an employer to have any agreement with an employee that prohibits the employee from working for a competitor or starting their own business. Although it remains to be seen how strictly this rule will be enforced (if passed), employers should take steps now to ensure that their written agreements with employees will withstand further scrutiny and continue to protect the company’s intellectual property.

So, how can employers protect their assets without the use of broad confidentiality agreements? The answer is through multiple measures that protect your company’s intellectual property.

  1. Refined confidentiality agreements. Narrowly tailoring the definition of “confidential information” to fit your company’s business may help to ensure such an agreement stays outside of the FTC’s non-compete definition. One way to help narrow the scope of the definition of “confidential information” is to include express exceptions to such definition, including, for example, “information that is or becomes publicly available, so long as a breach of the confidentiality agreement was not the reason for such availability.”
  2. Intellectual property provisions in employee handbooks and similar agreements and policies. Having express language that your company owns all ideas, inventions, etc. developed by an employee during their employment, and that each employee assigns all intellectual property rights in the same to the company, will make clear that the employee does not have the right to use such at a new job or in connection with starting their own business.
  3. Policies and procedures enforcing the aforementioned. This can include exit interviews with employees to let them know what they agreed to in such agreements and policies. It can also include an IT policy that identifies how employees’ emails, laptops, and any other devices with information are to be treated when an employee leaves, e.g., each employee sits down with IT to ensure all company information is retained by the company and does not leave with an employee’s devices.

There is little doubt the FTC’s rule, if passed in early 2024, will have an effect on the employer-employee relationship. But, there are ways to mitigate that effect and secure your company’s rights in its intellectual property assets. The tools above are just a few examples of ways to prevent intellectual property loss from employee departures, transitions, and remote work. If you have any questions about the FTC’s proposed rule, or would like an evaluation of your current agreements and policies, please contact the attorneys at McAfee & Taft.