FTC Proposes Rules Which Would Limit Noncompetes

In response to President Biden's July 2021 Executive Order on Promoting Competition in the American Economy, on January 5, 2023, the Federal Trade Commission (FTC) promulgated a proposed rule which generally bans all non-competition clauses with workers (including employees and independent contractors) as unfair methods of competition, subject to a limited sale of business exception. The proposed rule would have a broad application, generally prohibiting employers from entering into any new noncompetes and requiring the recission of all existing noncompetes. This Advisory summarizes the key takeaways from the proposed rule.

General Rule as Proposed

The proposed rule would generally prohibit employers from (i) entering into or attempting to enter into a noncompete clause, (ii) maintaining any pre-existing noncompete clause, or (iii) representing to a worker that the worker is subject to a noncompete clause where the employer has no good faith basis to believe