FTC Seeks To Ban Noncompete Agreements In Employment Contracts

On January 5, 2023, the Federal Trade Commission ("FTC") announced a broad proposed rule that would ban employers from imposing noncompete clauses on their workers. The FTC press release announcing the proposed rule states that noncompete clauses-which apply to about one in five American workers-suppress wages, hamper innovation, block entrepreneurs from starting new businesses and reduce American workers' earnings between $250 billion and $296 billion per year.¹ The proposed rule would prohibit employers from: (1) entering into or attempting to enter into a noncompete with a worker; (2) maintaining a noncompete with a worker; or (3) representing to a worker, under certain circumstances, that the worker is subject to a noncompete. The term "worker" covers paid staff in addition to independent contractors and unpaid staff.The proposed rule does not apply to noncompete provisions imposed upon 25% owners of a business in transaction documents related to the sale of the