The Federal Trade Commission (FTC) has proposed a new rule that would ban noncompete agreements between employers and a broad class of “workers,” including independent contractors and unpaid interns, senior executives, and everyone in between (read: everyone who does work for your company in any capacity). The FTC estimates that the new rule could increase workers’ earnings by nearly $300 billion per year. 

The proposed rule is based on an initial finding that non-compete agreements constitute an unfair method of competition (or, rather, unfairly suppress competition) and therefore violate Section 5 of the FTC Act. Whether that confers authority for the FTC to regulate noncompetes is what we lawyers call a Whole Other Thing. 

The proposed rule has been met with mixed reactions. Shocker. Supporters of the ban argue that noncompete agreements suppress wages, hamper innovation and prevent entrepreneurs from starting new businesses. Opponents argue that noncompete agreements are necessary to protect trade secrets and other confidential information. 

What should employers do while we wait this out? #deepthoughts

(1) Proposed FTC Rule Would Ban Most Noncompete Agreements. https://www.cooley.com/news/insight/2023/2023-01-23-proposed-ftc-rule-would-ban-most-noncompete-agreements Accessed 5/9/2023.

(2) FTC Proposes Nationwide Ban on Non-Compete Agreements. https://www.huschblackwell.com/newsandinsights/ftc-proposes-nationwide-ban-on-non-compete-agreements

(3) FTC Proposes Rule to Ban Noncompete Clauses, Which Hurt Workers and .... https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-proposes-rule-ban-noncompete-clauses-which-hurt-workers-harm-competition

(4) What the proposed ban on noncompete clauses means for you - CNBC. https://www.cnbc.com/2023/01/11/what-the-proposed-ban-on-noncompete-clauses-means-for-you.html 

(5) The FTC’s Proposed Rule Banning Employee Non-Competes. https://www.reuters.com/practical-law-the-journal/transactional/ftcs-proposed-rule-banning-employee-non-competes-2023-02-07/