Worklaw Comments on FTC Proposed Non-compete Rule

By Worklaw® Network

May 4, 2023

For immediate release

On January 5, 2023, the Federal Trade Commission (“FTC”) proposed a new rule which, if adopted, would ban U.S. employers from using non-compete agreements. In its notice of proposed rulemaking (“NPR”), the FTC sought public comment on the proposed rule.

Worklaw® Network, a non-profit organization representing more than 350 labor and employment lawyers, has submitted comments opposing the FTC’s proposed rule. As explained in Worklaw’s comments,  while theoretically, a uniform national standard could benefit both employers and employees by bringing some uniformity to an area of law that is fraught with ambiguity and inconsistency, Worklaw opposes the NPR as currently formulated  because it is likely to create further uncertainty. Among the specific concerns addressed by Worklaw are:

•    The proposed definition of what constitutes a “de facto” non-compete agreement is overly broad and potentially conflicts with other federal law, including the Defend Trade Secrets Act to the extent that the definition may prohibit the use of post-employment confidentiality restrictions.
•    The NPR fails to clarify the extent to which the prohibition on non-competes would apply to other common post-employment restrictive covenants such as “garden leave” provisions and/or customer non-solicitation provisions would be prohibited by the proposed rule.
•     The proposed requirement that all existing non-compete restrictions be rescinded arbitrarily nullifies and modifies existing employment and contractual relationships without notice and will have unintended and unpredictable consequences.
•    The NPR fails to distinguish between the use of non-competes in lower wage/lower skill provisions with the use of restrictions for highly compensated executives, technical employees, and/or sales employees.

Worklaw® Network is a network of independent law firms practicing management side labor and employment law on behalf of employers, including the use of non-compete and other restrictive covenants. Collectively, Worklaw Network operates 37 offices in 28 U.S. states and internationally, with affiliate members in Canada, China, Europe and India. Every Worklaw Network member is a local firm with strong ties to the legal and business community that the firm serves, providing knowledge of the local landscape where employers have operations.