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CLIENT ALERT: Employer and Employee Update on Nationwide Ban of Non-competes – “Wait and See” or “Roll The Dice”

September 4, 2024 is the day. If the courts do not issue an order prohibiting the enforcement of all or any part of the non-compete rule, it will be the law of the land starting September 4, 2024.

The legal challenges have already been-fast-tracked. We expect a decision on whether the non-compete rule stands or falls, in whole or in part, in July 2024. For employers and employees, in practice that means there is just 4 to 6 weeks of actual lead time before a possible decision and the effective date of September 4, 2024.

If you are deciding whether to change employment, renegotiate the terms of employment or enforce your current employment contract rights, you do not have 120 more days to consider – you have just four to six weeks to explore, perform diligence, decide and act.

Second, without alteration, the non-compete rule applies to all business sectors, most business entity forms, and both publicly-traded and private companies. It is retroactive in reach, and it will touch almost every level of employment except for the very highest level of C-suite executives – potentially applying to even executive officers who sit at the top of their distinct business lines, divisions, groups or departments. Only the top decision-maker(s) will be excluded from the ban.

Employers are reassessing the profiles, functions, needs and compensation of their employees in order to decide how best to protect their interests and align their employees’ interests with their own. Employers that pay highly competitive salaries, commissions, and bonuses and invest in the tools, training, credentialing, and licensing of their employees should re-evaluate the “value of the total employment package” without restraints against competition, including the timing and conditions of those pay packages to retain talent and disincentive employees from “taking the money and running” for the next best offer.

Whether you view this as employers “handcuffing” employees to their business or employers protecting their investments in people and competitive “know-how,” decisions must be made.

This is especially true across service sectors. In the financial services sector, banks, funds, investment advisors and broker-dealers, should re-evaluate how to assert greater ownership and control over investors and account customers who are the underlying assets. Employees should re-evaluate the advantages of the status quo versus greater mobility and better compensation in the future. In technology, advertising and marketing, employers and employees should re-evaluate how a non-compete ban would impact talent, intellectual property and the lucrative client relationships that drive those sector dollars.

Do you sit tight or “roll the dice?” If you have questions, please contact Scott Furst at SRFC at (212) 930-9700 or sfurst@srfc.law

About The Author

daniel scott furst

Scott Furst is a member of Sichenzia Ross Ference Carmel’s Business Litigation & Arbitration, Broker-Dealer Regulation and Compliance Groups. He has extensive civil litigation, regulatory action, investigations and enforcement defense experience with a specialization in securities, business, complex commercial litigation and employment matters involving senior executives, including with regard to contract disputes, investor, shareholder and member disputes, covenants litigation and statutory discrimination claims, in state and federal courts, before the Securities and Exchange Commission, Financial Industry Regulatory Authority, American Arbitration Association, and JAMS. Mr. Furst also routinely advises, negotiates and drafts employment and transactional agreements for senior executives across all business sectors, including officers and investors in the fund structure and formation space for private equity funds, hedge funds, real estate funds and hybrid vehicles for alternative investments.