THE FTC WANTS TO NUKE NONCOMPETES

Back in July 2021, President Biden issued an Executive Order calling on the Federal Trade Commission (FTC) to "curtail the unfair use of noncompete clauses." It took some time, but the FTC has finally obliged. And now we know how the FTC interprets the word "curtail" (SPOILER: it's not narrowly).

On Jan. 5, the agency proposed a new rule that would ban almost all noncompete clauses. The new rule would make it "an unfair method of competition" for an employer to enter into, attempt to enter into, or maintain a noncompete clause with a worker. So new noncompete clauses would be prohibited, and old clauses would be stripped of enforceability. But the proposed rule does more than impact the efficacy of noncompete clauses—it also governs how employers discuss them. The rule prohibits employers from representing to workers that they are subject to noncompete clauses when there's no good faith basis to believe an enforceable noncompete clause exists. It also requires employers to notify workers (through "individualized communications") that they are no longer subject to noncompete clauses. This notice requirement applies to current and former employees. Although the new rule does have a carve-out for noncompete clauses executed by people selling businesses, it's safe to say it would curtail noncompetes.

Three of the four FTC commissioners voted in favor of the proposed rule. According to FTC Chair Lina M. Khan, "[t]he freedom to change jobs is...

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