This week, the Federal Trade Commission proposed a new rule that would ban employers from requiring any employees to enter into non-competition agreements based on the proposition that doing so constitutes an unfair method of competition and therefore violates Section 5 of the Federal Trade Commission Act.
The sweeping language of the proposed rule (which would also require employers to affirmatively notify current and former employees that existing non-competition agreements are no longer in effect) is likely to receive sizable attention during the coming 60-day comment period. The FTC has invited comments on multiple aspects of the proposed rule, including whether different standards are appropriate depending on the employee’s salary level. If implemented, we expect challenges to the constitutionality of this proposed rule.
Until the final rule, if any, is implemented, companies should continue to review and consider the laws in the states in which they operate, many of which have significantly changed in the past few years.