Six months ago, the Federal Trade Commission proposed a new rule that would ban employers from requiring employees to agree to non-compete clauses in their contracts, while making any existing agreements void. But is this proposal more or less a pipe dream?
The FTC held a public forum through April 19 where any concerned parties could share their criticisms or support for the non-compete ban — 27,000 comments later, it was clear the FTC would have to put the brakes on their proposal, postponing the final vote to April 2024.
While supporters of the non-compete ban, like U.S. senators Sherrod Brown and Elizabeth Warren, argued the new rule would increase career mobility as well as wages, those in opposition, like the U.S. Chamber of Commerce, felt the FTC offered employers too little protection. Ultimately, both sides raised valid points, says Mike Jones, partner at global law firm Morgan Lewis. Jones specializes in cases involving restrictive covenant agreements like non-compete clauses.
Read more: The FTC has proposed banning non-compete clauses — how employers can prepare
"The rule includes an outright ban on virtually any type of non-compete agreement," says Jones. "What the FTC is proposing really raises the risk of there not being any sort of protection of trade secrets or confidential information."
With seemingly no exceptions, many employers are worried the FTC's non-compete ban would put their intellectual property at risk and stunt innovation. For example, small...
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