If you have been around Texas construction in the past decade, you’ve no doubt heard about a foreman shopping his crew around. You’ve probably worried about a key superintendent or project manager taking his skills to your competitor. Maybe you have lost sleep over an estimator with a LinkedIn profile that says he is immediately open to a new job.

One tool historically used by employers in multiple industries, including construction, to mitigate against job-hopping employees is the non-compete clause. If you are a contractor and you use “non-competes” as a tool to help with employee retention, it is time to think about a visit to Home Depot. You may need another tool.

Early this year, the Federal Trade Commission published a proposed rule that would effectively eliminate non-compete agreements and void existing ones. Gray Reed’s Employment Group answers questions about the proposed new rule in this Employment Alert.

Key Takeaways:

  • The proposed rule also prohibits constructive non-competes – other terms in an employment agreement that are so restrictive that they effectively amount to a non-compete like an overly broad non-disclosure requirement.
  • It’s a proposed rule, not a rule. The FTC will receive comments on the proposed rule through mid-March 2023, unless the period is extended. Industry comments will have to be considered and addressed before a final rule is issued.
  • Uncle Sam will do something with non-competes or at least try. The final rule will likely be challenged in court so it will take a while before we know what that really looks like.
  • While the final rule is currently unknown, wise contractors will start thinking about new, better ways to retain key employees than the use of broad non-compete and non-disclosure agreements.