The Federal Trade Commission proposed a rule to ban non-compete clauses on January 5, 2023. In a press release, the FTC claimed such contractual provisions are “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.”
The FTC will accept comments from the public through March 10, 2023, before publishing a final rule. Any final rule is unlikely to take effect for at least 60 days after the publication of the final rule in the Federal Register, and litigation may delay its implementation further.
The rule, if implemented, will not apply to industries over which the FTC lacks jurisdiction, such as banks, savings and loan institutions, federal credit unions, common carriers, air carriers, and persons and businesses subject to the Packers and Stockyards Act of 1921. In its present form, the rule contains few other exclusions.
Employers who utilize non-compete agreements or other restrictive covenants with employees or independent contractors should consult with their employment law counsel and be prepared to take action in the coming months if the FTC publishes a final rule.
This article is not intended to provide legal advice. If you seek advice regarding the FTC’s proposed rule, Keith L. Hammond, Esq., is available to discuss the potential implications of this rule on your business.