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Public Comment Sought on Proposed Federal Ban of Non-Compete Agreement

From IEEE-USA Insight

The U.S. Federal Trade Commission (FTC) recently proposed a rule to prohibit the use of non-compete agreements by employers in almost all circumstances as an unfair method of competition, and is seeking public comment on the proposed rule. The FTC’s action was a response to an executive order on promoting competition in the U.S. economy issued by President Biden in July 2021.

Non-compete clauses are agreements that prohibit an individual from working for a competing company or starting their own business in the same industry for a certain period of time after leaving their current employer. These clauses are commonly used in employment contracts, particularly in industries such as technology and finance.

FTC’s proposed rule would generally prohibit employers from using non-compete clauses and make it illegal for an employer to:

  • enter into or attempt to enter into a non-compete with a worker;
  • maintain a non-compete with a worker; or
  • represent to a worker, under certain circumstances, that the worker is subject to a non-compete

The proposed rule would also apply to independent contractors and anyone who works for an employer, whether paid or unpaid.  Employers would be required to rescind existing noncompete agreements with notice to their employees.  The draft rule also leaves open the door to FTC scrutiny of employer non-disclosure agreements and other employment restrictions if they are so broad in scope that they function like noncompete agreements.

Public comments are requested on the proposed FTC rule by 10 March 2023.

For more information on the FTC’s action, see: https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-proposes-rule-ban-noncompete-clauses-which-hurt-workers-harm-competition

To review and comment on the proposed rule, go to: https://www.regulations.gov/docket/FTC-2023-0007/document

See IEEE-USA Insight for more info.

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