By: Attorney Samuel J. Spurney
The Federal Trade Commission (FTC) recently proposed a rule that would ban the use of noncompete clauses in employment contracts. Noncompete clauses have faced increased scrutiny by the FTC and the proposed rule is part of the FTC’s larger effort to promote competition and protect consumer welfare.
The FTC and other proponents of the abolition allege that noncompete clauses reduce employee mobility and lead to reduced innovation and higher prices for consumers. By banning noncompete clauses, the FTC hopes to create a more competitive business environment that will ultimately benefit consumers.
Business owners commonly use noncompete clauses in employment contracts to maintain a competitive advantage by preventing employees from taking valuable knowledge and experience gained while working for the company to a competitor.
While several states have abolished or limited the ability to use noncompete provisions in the employment context, the proposed rule would go a step further by banning their use at the federal level. If finalized and implemented, this would be a significant employment law development for businesses and employees.
Opponents of the FTC’s position state that the proposed rule is overbroad and will cause many unintended consequences. As such, it is likely that any rule, if finalized, will face strong legal opposition.
It is important to note that at this time the proposed rule is just that – a proposal. The FTC is currently seeking public comment on the rule, and it remains to be seen whether there will be changes if the rule is finalized and implemented. Nevertheless, the proposal is a significant development for businesses and employees, and it is worth keeping an eye on as it moves through the regulatory process.
The information published by the FTC can be found at the following link: https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-proposes-rule-ban-noncompete-clauses-which-hurt-workers-harm-competition
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This blog post is provided for informational purposes only and by its very nature is very general. This information is not intended as legal advice.