In ‘radical departure,’ FTC proposes ban on noncompetes as unfair competition

Government agencies regulate, manage, and oversee many aspects of our society, including noncompete agreements. The Federal Trade Commission (FTC) recently proposed a rule that would ban the use of noncompete clauses in employment contracts in keeping with its mission to “[protect] the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research, and education.”

What are noncompete agreements?

Noncompete agreements are employment provisions that ban workers at one company from going to work for, or starting, a competing business within a certain period after leaving a job.

In its simplest terms, noncompetes are a type of contract where you agree to give up working (usually for a specific time in a geographic area or in a specific field or for specific competitors of your employer) in exchange for something else (for example, acceptance of a job or receipt of a severance payment).

Proposed rule prohibiting noncompete agreements

The FTC’s proposed new rule would ban employers from requiring noncompete agreements from their workers. According to the FTC press release issued on January 5, 2023, the proposed rule would make it illegal for an employer to: