The Federal Trade Commission (FTC) is proposing a new rule that would prohibit employers from using noncompete clauses.<\/p>\n\n\n\n
The proposed rule would make it illegal for an employer to enter into, attempt to enter into, or maintain a noncompete with a worker, and to represent to a worker that they are subject to a noncompete.<\/p>\n\n\n\n
The proposed rule would apply to both employees and independent contractors, and would require employers to rescind existing noncompetes and inform workers that they are no longer in effect.<\/p>\n\n\n\n
The proposed rule would not apply to other types of employment restrictions, such as non-disclosure agreements, but could apply if they are so broad in scope that they function as noncompetes.<\/p>\n\n\n\n
The FTC is seeking public comment on the proposed rule and will review the comments before issuing a final rule. The comment period is open until March 10, 2023.<\/p>\n\n\n\n
What does it mean?<\/strong><\/p>\n\n\n\n It’s estimated that over 30 million workers, or 18% of the U.S. workforce, are required to sign a noncompete agreement before accepting a job. <\/p>\n\n\n\n If the proposed rule is implemented, companies would be required to cancel all existing noncompete agreements and inform current and past employees of the cancellation.<\/p>\n\n\n\n Labor and employment attorney Michael Schmidt of Cozen O’Connor in New York said, “the federal government is taking this action broadly, with practically no exception.” <\/p>\n\n\n\n This means that the impact of the ban will be felt by companies with employees governed by noncompetes, as well as companies looking to hire workers bound by non-competes.<\/p>\n\n\n\n The public comment period for the proposed rule is open until March 10, and the Federal Trade Commission will review all submissions and make changes accordingly.<\/p>\n\n\n\n However, attorney Schmidt warns that this rulemaking process could take up to a year, or even longer if it is challenged in court.<\/p>\n\n\n\n