The Federal Trade Commission (FTC) has recently turned its focus to employee noncompete clauses, with the agency announcing a proposed regulation on January 5, 2023 that would implement a near-comprehensive ban across the United States, with limited exceptions. Employee noncompete agreements have been used extensively by technology companies seeking to protect their innovations, so this development could have significant ramifications for the industry.

The Proposed Regulation

Notably, the proposed regulation would apply to noncompetes with all types of employees, regardless of position within the company, access to confidential information, or income level.¹ It would also extend to similar agreements with independent contractors, interns, and volunteers. Further, the proposed regulation would also apply retroactively to existing noncompete agreements, meaning technology companies with preexisting noncompetes would be required to rescind them and notify both current and former employees that those agreements are no longer in effect.

The proposed regulation would not, however, affect other forms of employee agreements such as non-disclosure or non-solicit agreements unless such agreements operate in practice as a noncompete agreement (i.e., where non-disclosure requirements are so broad that they have the effect of precluding the employee from working in the same field). It also will not affect non-employment-related noncompetes, such as non-compete agreements entered into...

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