Ban on noncompetes may be threat to nondisclosure agreements
Hubbard Snitchler & Parzianello
Last week, the Federal Trade Commission proposed a regulation that would ban all noncompete agreements. Some observers think that this proposed ban could lead to a similar ban on nondisclosure agreements. Others are not so sure. The FTC ban On January 5, 2033, the FTC published a proposed regulation in the Federal Register that would essentially prevent all business from requiring employees to sign noncompete agreements. Noncompete agreements are used primarily to prevent employees from leaving one company and then taking a job with a competitor. The employee often brings along important corporate information, such as customer lists or formulas for competing products. The regulation was hailed by pro-employee advocates as an important step in freeing up the marketplace. Opponents of non-compete agreements believe that their use stifles job availability and reduces competition. The proposed regulation is scheduled for a public hearing later this year. What about NDAs Nondisclosure agreements (NDAs) are close cousins of noncompete agreements in the employment law field. They are used to prevent employees from taking important company information with them if they should accept a job with a competitor. In this respect, the critics of NDAs appear to be on solid ground in predicting that the FTC’s next target will be the use of NDAs to restrict the disclosure of information by former employees. An important exception NDAs have a use that distinguishes them from NDAs used in employment cases. NDAs are often used to facilitate the settlement of many different kinds of lawsuits, including trade secret cases, product liability cases, personal injury cases, medical malpractice cases, and the like. During the course discovery in such cases, at least one litigant may resist the public disclosure of confidential information that was produced during discovery. Requiring all parties to sign an NDA prohibiting the public disclosure of information revealed during the lawsuit provides an important incentive to settlement to an entity that may be reluctant to risk public disclosure of its secret or confidential information. The future The future of NDAs is unclear at the moment. The FTC has given no hint that it will seek to outlaw these agreements, but its recent announcement of its proposed ban on noncompete agreements came as a surprise to the business community. Any person or business that has been asked to sign an NDA may wish to consult an experienced corporate attorney about the terms of the agreement and the possibility that the FTC will take action banning the use of such agreements.The post Ban on noncompetes may be threat to nondisclosure agreements first appeared on Hubbard Snitchler & Parzianello PLC.