Pending a court challenge, a new federal rule would prohibit virtually all noncompetition agreements between employers and workers. Hannah Addison and Michael Twomey of Kane Russell Coleman Logan break down common questions surrounding the FTC’s new noncompete ban.
In April, the Federal Trade Commission (FTC) issued a final rule implementing a comprehensive ban on noncompete agreements with workers after determining such agreements represent an unfair method of competition under the “Unfair or Deceptive Acts or Practices” section of the FTC Act.
Given the scope of the Rule, substantial concerns exist that the FTC has exceeded its legal authority — indeed, the rule faced swift legal challenges — but companies would be well-advised to take stock of their agreements with employees that contain non-competition clauses as well as other restrictions that may be implicated by the rule (such as non-disclosure or non-solicitation provisions).
The rule is scheduled to become effective in September, about four months after being published this week on the federal register, though the pending court challenges could change that date or force alterations in the rule itself.
What agreements are covered?
This rule applies to any agreement with a worker containing a noncompete clause, defining such a clause as…
