FTC’s Ban on Non-Competes is the Big News in Employment This Year …. Or is it?
This week the Federal Trade Commission upended the world of employment law by passing a final rule banning almost all non-compete agreements for employees and independent contractors. Employees must be informed that their existing non-compete agreements are no longer valid. Existing non-competes for senior executives remain in effect. Non-competes remain legal as part of a contract for the sale of a business, i.e., a seller of a business can be required not to compete with the business they just sold. Business groups cried foul, and the United States Chamber of Commerce and others immediately filed suit to stop the new rule. A non-compete is a contract, generally forced on employees as a condition of employment, that prohibits the employee from working for a competitor, or in the same field as the employer, for one or two years after the employee leaves the employer. The justification for these restrictions is to prevent workers from jumping ship and taking business secrets, clients, customers, and vendors to a competing business. The FTC said the restrictions are an unreasonable restraint of trade, which limit worker mobility and reduce wages and economic growth. Many states have already restricted the scope of allowable non-competes in recent