A new rule proposed by the Federal Trade Commission (FTC) would ban employers in the United States from forcing non-competes on their employees or independent contractors. If the rule is implemented by the FTC, then non-competes would be illegal at the federal level and would affect employers and their workers across the country.
A non-compete is when an employee agrees not to work for a competitor or start a competing business in the same field or industry within a certain time period. Non-competes could also require employees to not compete within a specific geographic area after their employment ceases. Employers use non-competes to ensure that employees do not use information obtained during their employment in a way that harms the employer.
Non-competes were first used in employment agreements with senior executives, who generally have more bargaining power than the everyday employee. However, as employers look to protect their confidential information, relationships, goodwill and investment into the training of an employee, non-competes have trickled down to nearly every employee or independent contractor.
Currently, only California, North Dakota, Oklahoma and Washington, D.C., have prohibited non-competes from being enforced. Otherwise, most states allow a non-compete to be enforced. However, some states may have caveats as to whether a non-compete is enforceable. For example, New York will only allow non-competes if the non-compete (1) is...
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