Recently, the Federal Trade Commission (FTC) announced a proposed rule that would prohibit employers from imposing or enforcing non-compete clauses on workers. The proposed rule will have a public comment window of 60 days after publication in the Federal Register.
- The Rationale for the Proposed Rule – The FTC’s proposed rule is based on President Joe Biden’s 2021 Executive Order on Promoting Competition in the American Economy, which encouraged the FTC to exercise its statutory rule-making authority under the Federal Trade Commission Act to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”
- Overview of the Proposed Rule – If adopted, the proposed rule would:
- Ban employers from entering into non-compete clauses with workers and independent contractors
- Require employers to rescind existing non-compete clauses with employees
- Require employers to actively inform their employees that their non-compete agreements are no longer in effect
- Impact on Employers – At this stage, the proposed rule does not create any new obligations for employers. However, employers who use non-compete agreements should become familiar with the proposal. Interested employers can submit comments to the FTC.
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