FAQs For Recent FTC Actions Against Employer/Employee Non-Compete Clauses

WHAT HAPPENED?

The FTC announced a proposed regulation ("Non-Compete Rule") that, if implemented, would ban most employer/ employee non-compete clauses nationwide, superseding state laws that are less restrictive than the FTC rule. Under the proposed rule, an employer would violate § 5 of the FTC Act, which prohibits "unfair methods of competition," if it:

• enters or attempts to enter a prohibited non-compete clause with an employee,
• maintains an existing prohibited non-compete clause, or
• represents that an employee is subject to a non-compete without a good-faith belief that the non-compete is lawful.

As drafted, the Non-Compete Rule would apply to almost all employers and workers. The broad definition of "worker" covers both employees and independent contractors, and other workers whether or not classified as employees, including externs, interns, volunteers, apprentices, or sole proprietors who provide a service to a client or customer. Once adopted,