On January 5, 2023, the United States Federal Trade Commission (“FTC”) proposed a new rule (the “Proposed Rule”) that — if implemented — could dramatically restrict the use of non-compete agreements throughout the United States. This proposal follows on the heels of the FTC’s January 4, 2023 announcement of consent orders entered into with three companies and two individuals alleging that the companies and owners engaged in unfair methods of competition by imposing noncompete restrictions on workers in positions ranging from low-wage security guards to manufacturing workers to engineers. The orders prohibit the companies, and, where applicable, their individual owners, from enforcing, threatening, or imposing non-compete agreements against relevant employees.

The Proposed Rule would ban employers from entering into post-employment non-compete agreements with their workers, drastically limit the availability of sale-of-business non-compete agreements, and require employers to rescind many existing non-compete agreements. A 60-day comment period followed by a potentially lengthy response period must be completed before any version of the Proposed Rule becomes effective, and any final rule ultimately adopted by the FTC may be meaningfully less prohibitive than the near-absolute Proposed Rule. Even if finalized, this is the FTC’s first attempt to adopt a non-compete rule and fierce opposition about the scope of the FTC’s rule making authority is a near certainty, especially...

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