On January 5, 2023, the Federal Trade Commission (“FTC”) proposed a rule banning provisions in employment agreements which prevent employees and independent contractors, for a period of time, from working for a competitor or starting a competing business. The FTC will accept public comments on the proposal for 60 days and consider those comments prior to issuing a final rule. The FTC’s proposal does not appear to address agreements barring confidentiality agreements or agreements barring solicitation of customers or employees of a former employer. The FTC does, however, intend to require employers to withdraw existing non-compete agreements and within six months, advise employees they are no longer in effect. The proposed rule would exempt companies that seek to require an owner selling a business from immediately re-entering the same industry. The FTC’s position is that non-compete restrictions block workers from switching jobs, depriving them of better wages and working conditions. The FTC also believes these agreements deprive businesses of needed talent. The FTC’s proposal is likely to meet legal challenges from business groups regarding the FTC’s authority to issue such a rule, as well as whether such a ban is justified. Frantz Ward LLP’s Labor and Employment Group is carefully monitoring these developments. In the meantime, if you have questions about the new proposed rule, please contact Douglas B. Schnee or any member of Frantz Ward LLP’s Labor and Employment Group.
Federal Trade Commission Moves to Ban Non-Compete Agreements
