Byrnes: Employers often have legitimate reasons to use non-compete agreements. This proposed rule itself is overly broad in that it would essentially ban the use of any non-compete or non-solicitation agreement for all employees and even independent contractors. While we may want to limit abusive non-compete agreements, of course, there is a way to tailor the rule so that legitimate non-competes would not similarly be subject to the ban.
Bloink: Sure, employers do often have legitimate reasons for asking employees to sign non-compete agreements. Unfortunately, however, employers often use non-competes that are overly broad and go far beyond what employers actually need to protect their important trade secrets and their businesses. This rule would benefit employees and foster competition generally.
Byrnes: Limiting the use of non-compete agreements as much as this rule proposes would have serious consequences for this country’s business owners. Business owners use non-compete agreements so that they can confidently share confidential information with their employees. Without that confidence, a business might be unable to share important details about the business with employees. How could we expect those businesses to effectively operate under circumstances where they have no assurance that an employee won’t simply walk over to a competitor and share confidential trade secrets?
Bloink: Non-compete agreements often prohibit competition and prevent employees from growing in their careers. They can force employees to remain in roles that they have simply outgrown because the terms of these agreements often prohibit employees from working for a broad range of competitors in their chosen field. Non-compete agreements can essentially be used to hold employees hostage in a single employment role, a situation we should work to prevent.
Byrnes: If made effective, this rule would have dramatic negative consequences for the economy as a whole. It would discourage business owners from investing in innovation and growing their businesses out of fear that an employee could simply hand over their hard work to a competitor. If we want to foster competition and economic growth, we must allow businesses to execute agreements designed to protect their secrets.
- Learn more with Tax Facts, the go-to resource that answers critical tax questions with the latest tax developments. Online subscribers get access to exclusive e-newsletters.
- Discover more resources on finance and taxes on the NU Resource Center.
- Follow Tax Facts on LinkedIn and join the conversation on financial planning and targeted tax topics.
- Get 10% off any Tax Facts product just for being a ThinkAdvisor reader! Complete the free trial form or call 859-692-2205 to learn more or get started today.