Ep 499: Non Competes Are No More – What You Need To Know | Matthew Miller Episode Recap

AJV (00:02):
So non-competes are going away. What do you need to know to stay compliant as an employer? So there is a new ruling by the FTC, right? The Federal Trade Commission on non-competes. Here’s what you need to know, is that the new non-compete rule is going into effect on September 4th, 2024, right? So as I record this, we are heading into middle of May, 2024. So in a short four months, this is happening. So there’s a cushion of window to get yourself prepared. What does it mean? Right? So this new comprehensive ban is federal, which means it is nationwide, not state by state, and it is banning all new, non-competes with all workers, right? So employees including senior executives. So this includes 10 90 nines consultants, employees, including senior executives. The final rule states that it is unfair to have a non-compete as it’s preventing a method of competition, and therefore they are banning it, right?
AJV (01:15):
So that is happening September 4th for existing non-compete. So anything that is established and in place, I would say prior to today, which is May 14th, right? So as I record this, anything that is before today would be existing. Like if you know about this, it is wise and I would advise you, not legally, but as a, a friend friendly advisor to go ahead and put these things into place because they’re coming, right? So what I’m talking about is pre-signed employee documents that have non-compete sent for those. This has a different, a little bit of a ruling for senior executives, and then it’s so it’s different for senior executives than it is for I would just call ’em non-senior executives. So what is the defining tool term of a senior executive? Typically it is someone who is making more than $150,000 a year, who is also in some sort of policy or decision making capacity, right?
AJV (02:21):
So don’t hold me to that for the, to the dime, but that’s what is technically considered a senior executive role. They have decision or policymaking power making more than $150,000, give or take a thousand or $2, right? So for those, for those individuals, for senior executives existing non-competes can remain in place, right? So existing can, but here, moving forward, again, I’m saying May 14th, like as you know about this, don’t be trying to like, just like hire a bunch of people if that’s not in your best interest. But this, this ban on September 4th also includes new senior executive positions, and they will, that will not hold to them. So it will hold, if you have a non-compete for existing ones, it will not for future ones after September 4th. So that’s the first thing. So if you are a non senior executive, right?
AJV (03:19):
So all work, all other workers different than senior executives it is not, nothing is enforceable after the effective date. It’s just gone, right? So existing ones for senior executives will hold intact, new ones will not, and for all other workers, it’s gone, right? So all other 10 99 or W2 employees the non-compete will not be enforceable after September 4th, okay? That’s, that’s, that’s the general thing that you need to know about this. Now there are some things that you should also know that are not a part of like this, you know, technically this federal ruling which are non-solicitation are staying intact, right? So as non-competes go away, which there are pros and cons to this, right? I used to be in the consulting world and this would be very advantageous for me in that role to not have a non-compete. But there are some nuances to that thing of proprietary information confidential information trade secrets, right?
AJV (04:22):
So there are some things that are still going to stay intact for a, you know, consultant work for hire 10 99, where if I, I’m currently being hired by, you know, X company with certain trade secrets, confidential information, proprietary whatever I’m not able to go and compete with a direct competitor with those things during my timeframe of work. But as soon as my timeframe of work is over the very next day, no non-compete will be eligible to me, right? So that is very much in my favor, although there is still some protection for the company, for the business owner who is hiring someone to come in. And this is where you just really need to make sure that as a, an employer as a business owner, this, this, you get this four month window that you really need to meet with your attorney.
AJV (05:12):
This is the time that you need to do contract reviews service agreement reviews for you and vendors. If you, if you hire consultants or 10 99 make sure you’re talking to your employment attorney about your current contracts because as non-competes go away, that doesn’t mean that non-solicitation is going away, right? So I think it is a fair to go, hey, like, you know, there are free market free trade here, right? If you choose to leave here, you can go do your own thing. You, yes, fine, but you cannot take our trade secrets and use them. You cannot take our confidential information. And this is where you really need to get into the nitty gritty
AJV (05:57):
Cross your t’s, dot, your i’s and your agreements to make sure that you actually have provisions, you have clauses that that does protect your proprietary information, your systems, processes, methodologies, frameworks, your ip, right? Those need to be in your employment agreements. Now, I am not an attorney. This is not legal advice. This is my opinion as a business owner that just has non-competes are going away. Doesn’t mean that you can’t still be protecting yourself and your business as you want to be free, open, and transparent with your team. Of course you do. At the same time protecting, you know, trade secrets and proprietary information as well as keeping your non solicitations intact, right? So just because an employee at free will decides to leave and go start their own thing, even if it’s in competition with you, they cannot recruit other employees.
AJV (06:50):
They cannot recruit away your clients and they cannot take your information and use it as their own, right? So there are some things here that are very much in favor of the individual, the employee, which is fine, right? But that’s where you as the business owner need to step in and go, great. And now I need to double down in these other areas with confidential information and my IP and non-solicitation and everything else to make sure that you are fairly protected, right? Not being overbearing or this is no time to panic. Most non-competes. We’re holding up in a court a lot anyways mo there are many states that have banned this years ago, like California. So yes, there’s a lot of talk and a lot of flurry about this, which is part of why we’re making this many podcasts right now about it.
AJV (07:44):
And at the same time, very few non-compete lawsuits we’re holding up in court anyways. So this is just kind of like making it a federal stance overarching of what really was hard to uphold anyways. But it’s a great opportunity and a necessary time to update all of your agreements as well as review and ensure that you do have other clauses protecting your information, your ip, as well as doubling down on non-solicitation as the non-compete will be no longer allowed. It will be illegal to have that. So you do need to ensure that all agreements are updated. Those are removed by September 4th because at that point people can sue, people can turn you in. The federal government even has a website and a form where you can go and submit people who still have this in their agreements. Don’t be one of those people.
AJV (08:39):
And go ahead and take care of this now. So quick high level update. If you need more information, talk to your attorney, right? that’s what you need to do. This is really a call to arms of, hey, big things are changing. Agreements need to be updated. Here’s what you need to know. The date is September 4th 2024, and this is going to apply to all workers in, in terms of new agreements for, you know, senior executives, W2 and 10 99 consultants as well as the, this does have some implications on existing, which is if you’re not a senior executive all existing agreements the non-compete will be null and void on September 4th as well. So from here, talk to your attorney, get those agreements updated and do what you need to do to make sure that you are compliant and up to speed post September 4th.