In recent weeks, the Federal Trade Commission (FTC) has intensified its scrutiny of non-compete agreements—most notably through its enforcement action against Gateway Services and letters sent to major health care employers. At the same time, state legislatures are actively considering 46 bills that could reshape the legal landscape for non-compete enforcement. Some of these bills target specific industries, such as health care, while others focus on wage thresholds. Ten states have proposed outright bans on non-competes, two of which would also prohibit customer and employee non-solicitation clauses.
Given this heightened regulatory attention, employers must proactively explore alternative strategies to protect their business interests. Below are five practical and enforceable contractual provisions that serve as effective substitutes for traditional non-compete agreements.
1. Customer Non-Solicitation Agreements
What they do:
Restrict current and former employees from soliciting your customers.
Why they work:
These agreements are more narrowly tailored than non-competes and typically fall outside the scope of legislation targeting non-compete clauses. They offer a focused way to protect client relationships without overreaching.
2. Garden Leave Clauses (Notice Provisions)
What they do:
Require employees to provide advance notice before leaving, during which they remain on payroll but are not actively working.
Why they work:
Garden leave provisions are generally enforceable and act as a de facto non-compete by delaying an employee’s ability to join a competitor. They are especially useful when an immediate departure could pose a competitive risk.
3. Trade Secret Protection
What they do:
Utilize state and federal trade secret laws to safeguard proprietary business information.
Why they work:
These laws provide robust remedies, including temporary restraining orders, injunctions, and monetary damages, if trade secrets are misappropriated. To benefit from these protections, employers must implement internal policies, access controls, and reasonable measures to maintain confidentiality.
4. Non-Disclosure Agreements (NDAs)
What they do:
Prevent employees from disclosing or using confidential company information during and after employment.
Why they work:
NDAs are enforceable in most jurisdictions and can be customized to cover both trade secrets and broader confidential information. Clear definitions of protected information are essential to ensure enforceability.
5. Golden Parachutes & Severance Incentives
What they do:
Offer financial incentives to discourage employees from joining competitors.
Why they work:
These arrangements align employee interests with company loyalty, particularly for executives or employees with access to sensitive strategic information. They are most effective when tied to compliance with NDAs and non-solicitation clauses.
Final Thoughts
As federal and state scrutiny of non-compete agreements continues to grow, employers must adapt. By combining these alternative provisions, businesses can build a comprehensive legal framework that protects their interests while remaining compliant with evolving regulations.
