
The FTC has voted to issue a final rule banning non-compete agreements for most employees. Under the new rule, non-competes will be considered an unfair method of competition in violation of Section 5 of the FTC Act.
Non-competes are common in many industries, and bar workers from moving to competing employers or starting a competing business for a certain period after separation from an employer. Once the FTC’s ban takes effect, employers will be prohibited from entering into non-compete agreements with all employees. Employers will also need to provide notice to current workers that any existing non-compete agreements will no longer be enforced against them. However, existing non-compete agreements for senior executives – employees in policy-making positions earning more than $151,164 annually – will still be legal.
Opponents of the ban on non-competes worry about ensuring sufficient protection for proprietary information, trade secrets, and intellectual property, but the FTC has said employers can still use confidentiality agreements and nondisclosure agreements to protect business information. Others challenge the FTC’s power to ban non-competes, claiming that only Congress has such authority.
The final rule will be effective 120 days after publication in the Federal Register. Legal challenges will be filed and opponents will request that implementation of the rule be deferred while the lawsuits are pending. The U.S. Chamber of Commerce has already said it will sue to block the rule from taking effect.
If you have questions or would like more information about the FTC rule banning non-competes, please contact one of our attorneys.
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