Devack & Chester PLLC

The FTC has proposed a new rule banning essentially all non-compete agreements. Not only would the rule prohibit new non-compete agreements, but it would require employers to actively rescind existing non-compete agreements.

Non-compete agreements can be an effective tool to protect a company from its employees and independent contractors taking the skills and knowledge provided by the company to the employees and independent contractors to a competitor of the company or to start a competing company. It encourages freedom of information and development within the company, with the knowledge and reassurance that the information and skills cannot be used against the company for at least a certain period of time.

On the other hand, non-competes have become widely overused, more than necessary to protect the businesses, and can seriously hinder an individual’s ability to work and earn a living in his/her chosen field. It is also argued that non-compete agreements impede healthy competition and hinder entrepreneurship.

There are legitimate arguments and important interests on both sides of the debate, and while this rule is only in its initial stages and much remains to be seen with regard to whether and in what form this rule becomes effective (also if it will be successfully challenged if it becomes operative), businesses and individuals on both sides of current non-compete agreements should be aware of the potential effects on them. In addition to the Public Hearing tomorrow, public commenting is currently open for the proposed rule: https://www.regulations.gov/document/FTC-2023-0007-0001