On January 5, 2023, the Federal Trade Commission published a proposed rule that would categorically ban noncompete agreements between employers and a broad class of “workers,” including independent contractors and unpaid interns, senior executives, and everyone in between. The proposed rule has no immediate impact and is likely to be challenged in court if it is made final, but companies should be aware of the development and consider alternative approaches to protect misuse of their confidential information.

Historically, the enforceability of employee noncompete agreements has been largely left to the states, with the vast majority of states evaluating these covenants under a reasonableness standard that accounts for employers’ legitimate interests in protecting confidential information and preventing free riding. Only a handful of states – most notably, California, Oklahoma and North Dakota – have imposed broad bans. Against this backdrop, if made final, the proposed rule would be a sea change in the enforceability of employee noncompete agreements.

The proposed rule was announced one day after the FTC announced settlements with several companies and individuals for allegedly imposing illegal restrictions on workers via noncompete agreements. These actions follow earlier Biden administration efforts to protect competition in labor markets.

The proposed rule is now subject to a public comment period for 60 days. If the FTC does issue a final rule, it would become...

Read Full Story: https://news.google.com/__i/rss/rd/articles/CBMiamh0dHBzOi8vd3d3LmNvb2xleS5jb...