SHRM is urging the Federal Trade Commission (FTC) to allow employers to continue using noncompete agreements with certain employees.
Employers and trade groups flooded the FTC with almost 27,000 comments on its proposed rule that would ban noncompete agreements and nullify existing noncompete agreements.
If that's not a record for comments to the FTC, "that's really close to it," said Scott McDonald, an attorney with Littler in Dallas. "It strongly calls for some response from the FTC. It provoked a very large reaction."
The FTC released a proposal on Jan. 5 to ban noncompetes, which stop employees from working for corporate competitors or opening their own competing business within a certain geographic area for a certain period of time after they leave a company.
The FTC said noncompetes constitute an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act. It concluded that noncompetes suppress wages, stifle innovation and make it harder for entrepreneurs to start new businesses. The proposal's comment period ended on April 19.
It's unclear when the agency might issue a final rule or what revisions it might consider.
When a final rule comes out, Pete Steinmeyer, an attorney with Epstein Becker Green in Chicago,
said he expects many lawsuits to follow, including injunctive relief that would stop the enforcement of the noncompete ban.
Three states—California, North Dakota and Oklahoma—have banned noncompete agreements entirely, and...
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