Federal Trade Commission Bans Noncompetes

Yesterday, the Federal Trade Commission (FTC) issued a new rule banning virtually all noncompete agreements covering workers in the United States. Absent a successful court challenge, the rule will go into effect 120 days after publication in the Federal Register (which is expected to happen shortly).

Under the new rule, and subject to a few narrow exceptions, companies are banned from entering into new noncompete agreements and enforcing noncompete agreements currently in effect with all workers.

The definition of "worker" is broad and includes not only employees but also independent contractors, externs, interns, volunteers, apprentices, or sole proprietors. The definition of "worker" does not include a franchisee in the context of a franchisee-franchisor relationship.