On January 5, 2023, the Federal Trade Commission published a proposed
rule that would categorically ban noncompete agreements between
employers and a broad class of "workers," including
independent contractors and unpaid interns, senior executives, and
everyone in between. The proposed rule has no immediate impact and
is likely to be challenged in court if it is made final, but
companies should be aware of the development and consider
alternative approaches to protect misuse of their confidential
information.
Historically, the enforceability of employee noncompete
agreements has been largely left to the states, with the vast
majority of states evaluating these covenants under a
reasonableness standard that accounts for employers' legitimate
interests in protecting confidential information and preventing
free riding. Only a handful of states – most notably,
California, Oklahoma and North Dakota – have imposed broad
bans. Against this backdrop, if made final, the
