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Do professionals still need to worry about noncompete agreements?

Many successful professionals in New York work in competitive industries. Well-compensated professionals in finance, medicine and other industries sometimes have to sign employment contracts that limit their future professional opportunities. A company might integrate special clauses into employment contracts that can affect an employee even after they leave their job with the organization.

For example, many employers have long required that employees sign noncompete agreements when accepting a job at the company. Those with access to trade secrets or in positions where they learn abut the inner workings of the company are the most likely to face such contract inclusions.

They must agree not to start a competing business or take a job with a direct competitor for a certain amount of time after leaving their position. Noncompete agreements often include penalty clauses and might lead to litigation. Companies have long used the civil courts as a way to prevent former workers from competing with them. Yet, this reality is changing.

The federal government has banned noncompetes

The Federal Trade Commission (FTC) announced last year its intention to vote on a new rule prohibiting noncompete agreements. It did exactly that in April of 2024 and instituted a new final rule. Currently, noncompete agreements are no longer enforceable anywhere in the United States of America.

Even if someone signed an employment contract before the ban went into effect, their employer can no longer enforce the noncompete agreement by taking them to court. The clauses may now serve solely as deterrents for those unaware of the change in policy. In other words, workers concerned about restrictive covenants in their contracts may have less to worry about than they initially think.

Sometimes, workers subject to noncompete agreements may have other restrictive covenants in their employment contracts that might still be enforceable. Therefore, reviewing the prior employment agreement and one’s plans for the future at length could help a professional avoid a scenario in which their former employer takes them to court.

The new ban on noncompete agreements can open the doorway to more opportunities for skilled professionals in New York. They no longer have to worry about employers using the civil courts to stifle their innovation. Learning more about evolving employment statutes at the state and federal level can help professionals more effectively grow their careers.