The Federal Trade Commission’s recent proposal on banning employment contracts has a legitimate and noble goal of protecting vulnerable, non-exempt employees. However, for partner, officer level or senior executives (exempt employees) who have access to important trade secrets or key client account data, the case for protecting corporate assets, or drawing the line of who owns those assets (in many cases intellectual property), is much more complex and nuanced. Regulatory intervention in these latter cases will inevitably lead to unintended consequences and market distortions, without a great deal more discussion and review than the current regulatory proposal appears to have.
As an anecdotal aside, firms with strong and inclusive cultures are much less dependent on these legal tools.
It is important to make sure to draw a distinction between non-disparagement, confidentiality and non-solicitation clauses in contracts, which courts have upheld and appear to make more business sense, as separate from the issue on non-competes. I believe that many who are less informed on the technical legal aspects of these employment contract issues often lump all of these together incorrectly. By Tony Rifilato