FTC sues employers over noncompete agreements

Many employers use noncompete agreements as a standard part of their employment agreements. The Federal Trade Commission (FTC) has now announced it wants to ban noncompetes and is pursuing litigation over their use.

Lawsuits filed

As one of its first actions of 2023, the FTC has announced its intention to challenge noncompetition agreements as a violation Section 5 of the Federal Trade Commission Act (FCTA), which prohibits unfair methods of competition. On January 4, it filed suit against three companies and two individuals seeking to force them to drop noncompete provisions affecting thousands workers in positions ranging from low-wage security guards to factory employees to engineers.

In a press release, the FTC argued that “these cases highlight how noncompetes can block workers from securing higher wages and prevent businesses from being able to compete.” The press release goes on to say the agency “is committed to ensuring that workers have the freedom to seek higher wages and better working conditions without unfair restrictions by employers” and to assert that it “will continue to investigate, and where appropriate challenge, noncompete restrictions and other restrictive contractual terms that harm workers and competition.”