FTC Proposes New Rule Banning Non-Compete Clauses

January 18, 2023

On January 5, 2023, the Federal Trade Commission (“FTC”) proposed a sweeping new rule (“the Proposed Rule”) that would ban almost all non-compete clauses in agreements between employers and workers. If finalized in its current form, the Proposed Rule would prohibit employers from entering into non-compete agreements with workers and require employers to rescind any existing non-compete agreements.

Employers should immediately consider how the Proposed Rule will impact them by taking stock of any agreements they have with current or former workers. The Proposed Rule will be subject to a 60-day public comment period, after which the FTC will likely issue a final rule that may or may not differ from the current version. If the FTC adopts the Proposed Rule as it is currently drafted, employers will have only 180 days after publication of the final rule in the Federal Register to come into compliance. Although this timeline may change in the event of revisions and/or legal challenges (which are likely), employers should nevertheless be prepared to act quickly if and when the Proposed Rule is finalized.

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