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Could 2024 bring a federal ban on non-compete agreements?

On Behalf of | Nov 19, 2023 | employment contracts |

Companies often require certain concessions from new employees during the hiring process. For example, employment contracts often include restrictive covenants. Businesses will require that workers avoid certain types of activity by including restrictive covenants in employment contracts. 

Noncompete agreements are common inclusions in modern employment contracts. They allow employers to prevent workers from starting competing businesses or taking a job with a direct competitor. There is a chance that non-compete agreements may become unenforceable in the near future. 

Who proposed a federal ban? 

Certain states, including California, have already banned the enforcement of non-compete agreements. Many other states may follow suit, while others place a variety of restrictions on their enforcement. Technically, Pennsylvania does allow employers to enforce noncompete agreements in certain scenarios. The agreement needs to be fair, with certain limitations on its enforcement. The worker will typically need to have received something of value for giving up their future competition rights. 

However, the Federal Trade Commission (FTC) has proposed a nationwide ban on noncompete agreements. The idea behind the proposal is that such agreements stifle innovation and fair competition. The FTC could vote on the matter in early 2024. Should the FTC institute a ban, workers in Pennsylvania will no longer have to worry that taking a new job or starting their own business will lead to litigation and financial challenges. 

Those subject to noncompete agreements may want to carefully follow developments in this area so that they can explore all of their economic opportunities as circumstances change. Learning more about federal and Pennsylvania state employment laws may benefit those subject to restrictive employment contracts and worried about their future economic opportunities.