How Businesses Are Getting Around Non-Compete Agreements
In the past few years, lawmakers have taken action regarding non-compete agreements, calling them unfair. Indeed they can be, limiting workers’ options and pay. Non-compete agreements often force workers to move or even change fields in order to get a decent job.
States such as California, Colorado, Minnesota, North Dakota, and Oklahoma have banned non-competes altogether. In the other 45 states, such as Florida, they are heavily regulated. To get around this and avoid penalties, some employers are asking employees to sign confidentiality agreements. These are not technically the same thing, but employers are adding broad provisions that incorporate restrictions that would normally be seen on a non-compete agreement.
In the workplace, a confidentiality agreement serves as a contractual arrangement preventing employees from disclosing or using any confidential information specified within the contract. Typically, employees sign such agreements when starting a new job. However, the wide scope of confidentiality clauses in employment contracts can effectively restrict employees from engaging in similar fields post-employment, which makes them similar to non-compete agreements.
Noncompete agreements are contentious as they explicitly curb competition and can impede employee mobility and innovation. They are largely prohibited in five states, notably California, with other states either banning them for certain income brackets or professions like primary care physicians. Generally, non-competes require legitimate business justifications, like safeguarding trade secrets, and must be reasonable in duration, geographical scope, and activity limits.
In contrast, confidentiality agreements are not viewed as trade restraints. They lack bans and are not typically subject to reasonableness criteria like non-competes. Agreements focused solely on safeguarding trade secrets are not usually problematic, since trade secrets are strictly defined and don’t hinder the use of public information or general knowledge.
The issue arises when confidentiality provisions extend far beyond trade secrets. The term “confidential” in itself does not solely denote trade secrets but implies an obligation of confidentiality between parties. Many agreements, like one requiring employees not to disclose any information related to the company’s business, can be overly broad with no geographic or temporal limitations.
Once confidentiality agreements mimic non-compete agreements in function, that is where the waters get murky. One study suggests that many confidentiality provisions are indeed being drafted to be very broad. They are written to last indefinitely and apply not just in a specific city or state, but across the entire world.
You can see why this is problematic. Turning confidentiality agreements into non-competes should be concerning to pretty much everyone. Even those who support enforcing reasonable non-competes should oppose these wide-reaching confidentiality agreements.
Learn More About Non-Compete Agreements
Non-competes are regulated in all 50 states. They may even be banned. This is why many companies are taking steps to get around them in some way.
If you are a business or employee, make sure your non-compete agreement is legit. An Orlando non-compete agreement lawyer B.F. Godfrey from Godfrey Legal can help with drafting and negotiation. To schedule a consultation, call (407) 890-0023 fill out the online form.
Source:
promarket.org/2024/02/08/confidentiality-agreements-can-act-like-noncompetes/
