Employment lawyer explains what HR leaders need to know

The Federal Trade Commission (FTC) has proposed a new rule that would ban employers from imposing non-compete clauses on their employees.

A non-compete clause, as defined by the FTC, is a contractual term between an employer and a worker that prevents the latter blocks from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends.

Traditionally, employers include these clauses in employment agreements and employees don’t even realize they exist until they give their two weeks’ notice. Then, it’s the HR leader’s duty to inform employees that they can’t work for a competitor for a specific amount of time (usually anywhere from six months to two years).

Approximately 30 million American workers are bound by a non-compete clause, according to the FTC, which estimates the proposed rule would increase workers’ earnings between $250 billion and $296 billion per year.

The proposed rule essentially prohibits all non-compete agreements except those entered as part of the sale of a business and requires employers to rescind all non-compete agreements currently in place, and to do so within 180 days of the date of the final rule publication. Written notification of the rescission must be sent to all employees who were subject to non-compete agreements, according to employment lawyer Robert T. Quackenboss, partner at...

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