As an update to our previous blog post on non-compete laws (found here), the Federal Trade Commission (FTC) proposed a rule yesterday that would ban non-competes in employment contracts.
The FTC's broad-sweeping proposed rule would ban employers from imposing non-competes on their workers, including employees, independent contractors, interns, volunteers, and any other workers.
Specifically, the proposed rule would make it illegal for an employer to (1) enter or attempt to enter into a non-compete with a worker; (2) maintain a non-compete with a worker; or (3) represent that the worker is subject to a non-compete. Going even further, the FTC rule would require employers to rescind any non-compete that was entered into with a worker prior to the compliance date and provide notice to the worker of the recission.
Other restrictive covenants are not subject to the proposed rule, as long as they are not so broad that they function as non-competes. There is also a limited exception to the proposed rule for certain non-competes entered into in connection with the sale of a business.
The proposed rule is based on a finding that non-competes constitute an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act. The FTC is seeking public comment on the proposed rule for 60 days after the Federal Register publishes the proposed rule.
The rule will be subject to hot debate and likely litigation, if it advances. The Gutwein Law Employment team will continue to update this story as more developments unfold.
