NDAs and Noncompete Clauses; The FCC Strikes Back
It is a bi-partisan move which reinforces the worker's ability to freely compete ....
The Federal Trade Commission's recent decision to ban most non-compete agreements is indeed a step in the right direction, especially when considering the overly broad and restrictive nature of NDAs like the one provided.
This particular NDA exemplifies why such agreements can be detrimental to innovation and worker mobility in the tech sector. Examining the NDA reveals several problematic provisions that align with the concerns addressed in the FTC's decision:
Broad definition of Confidential Information: The agreement defines confidential information expansively, covering "any and all information" related to the company's business, operations, plans, products, and more. This sweeping definition could potentially encompass a wide range of knowledge and skills that an employee might acquire during their work, effectively limiting their ability to use this expertise in future roles.
Non-solicitation clause: The agreement includes a 12-month non-solicitation provision that prevents the recipient from interacting with any of the discloser's employees, officers, or directors. This clause directly restricts employee mobility and networking, which are crucial for innovation and career growth in the tech sector.
Ownership of discussions and work product: The agreement states that any discussions, advice, feedback, or sample work product created by the recipient becomes the property of the discloser. This provision could severely limit an employee's ability to use their own ideas or work in future roles, stifling creativity and innovation.
Perpetual protection for trade secrets: While most of the agreement has a one-year term, any information marked as a "trade secret" remains protected indefinitely. This open-ended obligation could create long-term restrictions on an employee's career prospects.
Broad non-disparagement clause: The agreement prohibits both public and private disparagement of the other party or its services or business. This could potentially limit an employee's ability to express honest opinions or concerns about the company in the future, which is crucial for transparency and improvement in the tech industry.
These provisions, when combined, create an environment that restricts employee mobility, limits the free flow of ideas, and potentially hampers innovation – precisely the issues that the FTC's ban on non-competes aims to address.
As this article suggests, truly innovative firms don't need to rely on such restrictive legal measures to protect their intellectual property or retain top talent.
Companies like Apple and Google have thrived in California, where non-competes have long been unenforceable, demonstrating that success stems from creating an environment where the best and brightest want to stay and contribute their ideas.
The FTC's move to ban non-competes, and by extension, to scrutinize overly broad NDAs, will help foster a more dynamic and innovative economy. It will encourage companies to compete on merit – offering better working conditions, more engaging projects, and higher salaries – rather than relying on legal constraints to retain employees.
This shift aligns with both conservative principles of fostering competition and liberal ideals of protecting workers' rights.
By removing these artificial barriers, the tech sector can unleash a wave of entrepreneurship and creativity that will propel the American economy forward and maintain its competitive edge in the global marketplace.