On Jan. 5, the Federal Trade Commission (FTC) proposed a rule change that would ban non-compete clauses from contract negotiations, rescinding existing contracts as well as banning new ones.
The basis for the rule change, according to the agency, is that non-compete agreements violate the FTC Act because they create an unfair method of competition and harm employees. The proposed rule is broad in its scope, prohibiting anything that restricts an employee’s ability to seek or accept employment with another company.
Non-competes are historically an area of drama and concern due to their incredibly restrictive nature. They can bar a worker from seeking employment with a competing company or individual or prohibit them from starting a competing company. These restrictions can often apply whether a company has laid off the worker or they left voluntarily. Simply put, non-competes can leave employees in impossible situations at times.
A dissertation by Cornell Ph.D. candidate Kwan Seung Lee in 2019 tracked the history of non-competes and found that they’ve been used since 16th century England. Lee found that despite their long history, they weren’t a regular employment problem until the late 20th century when companies began to use them regularly to restrict their employees.
“Most U.S. state courts began to recognize the importance of the protectable business interests and have attempted to strike a balance between business interests and employee freedom,” Lee wrote before...
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