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Entrepreneurs no longer need to fear non-compete agreements

On Behalf of | May 16, 2024 | Employment Law

Some people grow up dreaming of starting their own businesses, but many others develop this idea during their careers. Someone’s current job might be what inspires them to think about starting a small business. They might recognize a gap in the local market because of what they do professionally. They might also obtain training or skills that could help them run a certain type of business.

Although many people dream of being their own bosses, quite a few workers have signed aggressive contracts with their employers that could lead to penalties for doing so. Previously, someone subject to a non-compete agreement could be at risk of both financial penalties imposed in accordance with the contract or with the damages claimed by an employer or a court order to cease competing with the former employer. Noncompete agreements have long prevented people from starting small businesses.

Those who have always dreamed of starting their own companies can now potentially do so with less personal risk. The federal ban on noncompete agreements could help thousands of entrepreneurs pursue their dreams that may have otherwise been deterred.

Noncompete agreements are now unenforceable

The Federal Trade Commission (FTC) recently completed a more than year-long process that culminated in the announcement of a new final rule prohibiting noncompete agreements and their enforcement in the civil courts. Companies can no longer use these agreements to restrict the economic activity of employees after they leave their jobs.

The new final rule also prohibits businesses from enforcing existing noncompete agreements. Noncompete agreements have long stifled the ambitions of those who might otherwise start their own companies. The possibility of having a former employer file a lawsuit creates a profound chilling effect that may prevent people from trying to begin their own companies.

Thankfully, this change in federal policy paves the way for those with dreams of running their own company to do so without the risk of a contract lawsuit. Sitting down to talk about business formation at length can help hopeful entrepreneurs pursue their dreams of business ownership.

Someone who has already signed a contract that theoretically prevents them from starting a business no longer has to worry about financial penalties or other consequences if they move ahead with starting their own company. Reviewing a prior work contract and discussing a business plan at length with a skilled legal team can help an aspiring entrepreneur potentially feel much more confident about pursuing their dreams.

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