The Federal Trade Commission’s noncompete ban was challenged in court last week one day after it was adopted. Agenda, a Financial Times publication, spoke with Milbank partner Mike Shah about how boards of directors should be preparing for compliance.
In an article titled “Questions Abound for Boards After FTC’s Noncompete Ban,” Shah said: “These responsibilities can be delegated to a board committee, and at most companies, that would most likely fall to the compensation committee.” Management, working with the compensation committee, should begin “identifying individuals that they believe are crucial to protecting the legitimate business interest of the company, should they go compete.”
“Once these employees are identified, typically through an analysis of whether they possess trade secrets, client lists or other information that could impact competitiveness, management and counsel with board oversight, can craft methods to protect their business interests without using noncompetes,” he added.
“One such method could be offering “garden leave” to exiting employees, Shah said. So-called garden leave programs allow employers to place departing high-level employees on leave for a period of time, usually six months to a year, while still compensating them in order to allow time to pass before they can work for a competitor.”
Agenda, a Financial Times publication, is a boardroom resource with dedicated journalists that deliver independent, original analysis on the US corporate board space.
Click here to read “Questions Abound for Boards After FTC’s Noncompete Ban.” (Agenda access required)
