The Federal Trade Commission (FTC) won’t vote until next April on whether to ban non-compete agreements, according to reports by Bloomberg.
In January 2023, we explained that the FTC proposed a nationwide rule that would invalidate most existing non-compete agreements and prohibit employers from requiring their employees to sign new ones. According to the reports, it’s clear now that it will be at least a year before any rule is potentially adopted or becomes enforceable.
After publishing its draft of the rule in January, the FTC received almost 27,000 comments from the public. The comment period has now closed. The FTC will consider these comments and could revise the rule according to the feedback received. Because of overwhelming pushback from the business community and the near certainty that the rule would be heavily litigated, the final rule may be less sweeping than the original proposal. The FTC will vote on the final version of a rule in April 2024.
The currently proposed rule, if approved, would prohibit agreements that restrict a former employee from accepting a new position with their former employer’s competitors within a limited time period and geographic area. The ban also would apply to related agreements like non-disclosures and training-repayment agreements where the agreements have the effect of prohibiting an employee from accepting other employment.
The FTC estimates that a change in the law, of this nature, could impact approximately 30 million American workers. Likewise, millions of employers are sure to be affected.
There is, however, no guarantee that the proposed rule will be approved and become law. While many in the federal government are lobbying hard in favor of the rule, there is staunch opposition from business groups, and the matter may ultimately take years to wind its way through the courts.
K|W|W attorneys will continue to monitor developments regarding the proposed rule and update you as they occur. At K|W|W, your workforce is our priority.