Non-compete provisions are receiving a lukewarm reception by the authorities on both sides of the Atlantic at the moment. With plans to make changes in the UK being actively discussed, and at a federal level in the United States as well as in several states, businesses should plan for some choppy and potentially uncharted waters.
Here is the current forecast.
On 5 January 2023, the US Federal Trade Commission (FTC) announced a proposed rule that would prohibit post-employment non-compete clauses in employment contracts across the United States. This was followed by a period of public comment, which ended on 19 April 2023. We have yet to see a final version published in the Federal Register, which would start the clock on a 60-day countdown before the rule would become effective.
The proposed rule, which would supersede state law, be retroactive in scope and would require employers to affirmatively provide notice to employees rescinding already signed non-competes, would stop employers from imposing direct non-competes on their workers (as well as preventing the use of indirect or de facto non-competes). Although some employers – such as certain financial institutions, nonprofit organisations and air carriers – may be exempt, violations of the proposed rule, which seeks to put an end to what the FTC describes as an 'unfair method of competition,' could result in fines and penalties.
Legislation to effectively ban post-employment non-compete...
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