FTC Proposes Ban on Employee Non-compete Clauses

On Thursday, January 5, 2023, the Federal Trade Commission (FTC) proposed a ban on non-compete clauses for workers in the United States. Non-compete clauses, which are commonly included in employment contracts, prohibit workers from competing with their current or former employer for a certain period of time, and typically in a certain geographical area, after leaving the company.

The proposed ban would apply to non-compete clauses for workers at all levels, including low-wage and middle-wage workers. 

However, the proposed ban would not apply to non-compete clauses that:

Protect trade secrets or confidential information;

Prevent the solicitation of customers or employees; or

Protect a company’s goodwill when an employee is terminated for cause.

The FTC has argued that non-compete clauses can have negative effects on workers and the economy as a whole. For workers, non-compete clauses can limit their ability to find new employment and can reduce their mobility within their chosen field. For the economy, non-compete clauses can stifle competition and innovation.

The proposal has received support from some worker advocacy groups and opposition from business groups. The FTC is seeking public comment on the proposal before deciding whether to move forward with the ban.

In addition to the proposal, the FTC has recently taken action against companies that require non-compete agreements, including settlements with several companies that required thousands of employees to sign such agreements.