FTC Cracks Down On Non-Competes As Unfair Methods Of Competition

In a first-of-its kind enforcement action, on Wednesday the Federal Trade Commission announced settlements with three companies and two individuals who the agency claimed violated Section 5 of the FTC Act by imposing non-compete restrictions on their workers that the agency said constituted an unfair method of competition. The agency said these non-compete restrictions prevented workers from obtaining higher wages and impeded other companies' ability to compete.

This development is the latest in a string of moves by the federal antitrust agencies to increase enforcement of labor-related antitrust violations, and finds its footing in the FTC's recently issued Policy Statement on "rigorous enforcement" against unfair methods of competition. The FTC also separately announced a proposed new rule that would limit the use of non-compete clauses. Companies should expect continued scrutiny of restrictive covenants in the labor arena as part of this increased enforcement