Garden leave called possible workaround to FTC noncompete ban

July 21, 2023 – Media Mention
Legal Dive

Herrick partner, John H. Chun, was quoted in Legal Dive discussing how employers are navigating the Federal Trade Commission's ("FTC") forthcoming proposed ban on non-compete agreements.

The article highlighted that employers are often looking to apply other types of agreements, including non-disclosure and non-solicitation agreements, to protect their interests without the FTC interpreting these agreements as de facto non-competes. The FTC “has provided little guidance as to when an NDA will cross that line,” noted John.

The article explained that the FTC's proposed rule on non-competes states that "it will look at whether non-disclosure and non-solicitations are functioning as non-competes, potentially violating the ban." This risk puts the onus on companies to justify why their use of these alternative agreements don't amount to “de facto” non-competes, said John.

The article noted that companies that are concerned their use of non-disclosure and non-solicitations violate the FTC's ban have alternate options. One option is a negotiated cooling-off period, which is generally referred to as "garden leave." The typical cooling off period is six months, during which departing employees are paid not to work for a competitor, said Chun. 

Click here to read the full article in Legal Dive.