On Jan. 5, the Federal Trade Commission (FTC) proposed a rule to prohibit employers from using noncompetition agreements. According to the FTC, the proposed rule would:
- Make it illegal for an employer to have a noncompete with a worker.
- Require employers to rescind existing noncompetes and actively inform workers that they are no longer in effect.
- Apply to independent contractors, unpaid interns and anyone who works for an employer – whether paid or unpaid.
- Generally, not apply to other types of employment restrictions, like non-disclosure agreements. However, other types of employment restrictions could be subject to the rule if they are so broad in scope that they function as noncompetes.
You can review the proposed rule here and submit a public comment by following the instructions in the proposed rule. The comment period is open through March 10, 2023.
Keep in mind that this is a proposed rule, so we don’t know if or when it will be adopted and, if so, whether the adopted rule will differ from the proposed rule. While we track whether noncompete agreements are limited or prohibited federally and at the state level, we can’t otherwise advise on using, drafting, or enforcing noncompetes.
If you’re interested in using noncompete agreements with employees, you should consult with an employment attorney who practices in your state.