FTC Proposes Rule to Ban Noncompete Clauses: What You Need to Know
The Federal Trade Commission released a new Proposed Rule to prohibit employers from imposing noncompete clauses on workers and, in fact, requiring employers to retract existing noncompete agreements with their employees, including independent contractors. Should this Proposed Rule become Final, it would have a monumental impact for employers across the country. However, getting to the finish line in the wake of having to change decades of history supporting noncompete agreements, will be no easy task for the FTC.
What Is the Proposed Rule
• The Proposed Rule would make it illegal for employers to enter into noncompete clauses with their workers, including independent contractors.
• The Proposed Rule would require employers to rescind existing noncompete clauses with workers and actively inform their employees that the contracts are no longer in effect.
• The Proposed Rule purports to supersede state laws. The reasonableness standard used in Florida would be supplanted by a more bright-line FTC rule.
What Employers Would the Proposed Rule Impact
• The Proposed Rule’s definition of “worker” means that the FTC intends the noncompete ban to apply as broadly as possible – from small physician owners to large corporations.
• The Proposed Rule is broad and applies to all industries and all categories of workers.
When Might this Take Effect?
• There is first a 60-day comment period the FTC will use to review the thousands of comments submitted. The FTC can then make changes in a Final Rule. This could take months. Once the Final Rule is issued, it may force lawsuits on the jurisdiction of the FTC’s involvement in noncompete agreements, among other issues.
What Can a Provider Do?
• Submit a comment to the FTC here.
The FCA will continue to keep you apprised of the progress of the Rulemaking process on the proposed ban on noncompete agreements.