The Federal Trade Commission Proposes to Ban Non-Competes

The future of non-competes is uncertain. On January 5, the Federal Trade Commission (FTC) proposed a new rule that would ban employers from imposing non-compete agreements on their workers. This rule would not only prohibit employers from entering into future non-compete agreements, but it would require employers to take affirmative steps to formally rescind pre-existing non-compete agreements. Although this rule does not ban the use of nondisclosure agreements, nonsolicitation agreements, and no-poaching agreements, such agreements would be subject to this prohibition if they are so restrictive as to effectively function as non-compete clauses.The good news is that nothing changes immediately. This proposed rule is open for comment for 60 days. The FTC may then revise the final rule, which would not become effective or require compliance for several months. It’s also fair to anticipate litigation challenging this rule, so there is time for everything to unfold before you need to take action on this issue.However, it’s not too soon to start thinking about how this might impact your business. Additionally, regardless of what this final rule looks like, many states have already started to enact their own legislation severely limiting the enforceability of non-compete agreements, and this trend will likely continue. It’s a great time to consider what changes you can make to protect your company while creating an environment where your employees will not want to leave and compete, even if they are not bound by an agreement.


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