On January 5, 2023, the Federal Trade Commission (“FTC”) proposed a rule to ban non-compete agreements between employers and “workers.” If the proposed rule is finalized without change, it will also require employers to rescind any existing non-compete agreements with current and former workers. The proposed rule broadly defines “worker” to include an employee, independent contractor, interns, apprentices, and sole proprietors. The term worker does not include a franchisee in the context of a franchisee-franchisor relationship but the term does include a person who works for the franchisee or franchisor.

The proposed rule defines non-compete agreements to include any agreements which have “the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer.” The proposed rule identifies two types of agreements that are prohibited by the rule:

• A non-disclosure agreement between an employer and a worker that is written so broadly that it effectively precludes the worker from working in the same field after the conclusion of the worker’s employment with the employer; and
• A contractual term between an employer and a worker that requires the worker to pay the employer or a third-party entity for training costs if the worker’s employment terminates within a specified time period, where the required payment is not reasonably related to the costs the employer incurred...

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