FTC Proposes Rule Banning Noncompete Agreements

By , and on January 19, 2023
Posted In Employment

On January 5, 2023, the Federal Trade Commission (FTC) issued a proposed rule that would prohibit employers from using noncompete agreements with their employees or independent contractors. This proposal arises from a preliminary finding by the FTC that noncompetes constitute an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act (FTC Act). It comes on the heels of the FTC’s November policy statement asserting its intention to rigorously enforce and expand the scope of Section 5 of the FTC Act’s ban on unfair methods of competition.

If adopted, this rule would make it illegal for an employer to enter into a noncompete agreement with a worker, maintain a noncompete with a worker or represent to a worker that the worker is subject to a noncompete. Employers would also be required to rescind existing noncompetes and inform workers that they are no longer enforceable.

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Brian Mead is an employment litigator and transactional advisor. He leads McDermott’s Trade Secrets and Restrictive Covenants Subgroup. Clients call upon him for his substantial experience prosecuting and defending employee mobility, restrictive covenant and trade secret litigation cases across various industries including private equity, healthcare, professional services, technology and manufacturing. Read Brian Mead's full bio.

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