By Dennis E. Westlind
Bullard Law,
On January 5, 2023, the Federal Trade Commission (“FTC”) proposed a new rule which, if adopted, would ban U.S. employers from using non-compete agreements. In its notice of proposed rulemaking (“NPR”), the FTC sought public comment on the proposed rule.
Bullard Law, through its membership in Worklaw® Network, has submitted comments opposing the FTC’s proposed rule.
As explained in Worklaw’s comments, while theoretically, a uniform national standard could benefit both employers and employees by bringing some uniformity and clarity to an area of law that is fraught with ambiguity and inconsistency, Worklaw opposes the NPR as currently formulated because it does not provide such clarity and is likely to create further uncertainty. Among the specific concerns addressed by Worklaw’s comments are:
The proposed definition of what constitutes a “de facto” non-compete agreement is overly broad and potentially conflicts with other federal law, including the Defend Trade Secrets Act, to the extent that the definition may prohibit the use of post-employment confidentiality restrictions;
The NPR fails to clarify whether less onerous post-employment restrictions such as a “garden leave” and/or customer non-solicitation provisions would be prohibited by the proposed non-compete rule and fails to contain a “safe harbor” allowing for the use of such restrictions in appropriate cases;
The proposed requirement that all existing non-compete restrictions be rescinded arbitrarily nullifies and modifies existing employment and contractual relationships without notice and will have unintended and unpredictable consequences.
The NPR fails to distinguish between the use of non-competes in lower wage/lower skill provisions with the use of restrictions for highly compensated executives, technical employees, and/or sales employees.
Bullard Law is a proud member of Worklaw Network, a network of independent law firms practicing management-side labor and employment law on behalf of employers. Collectively, Worklaw Network operates 37 offices in 28 U.S. states and internationally, with affiliate members in Canada, China, Europe, and India. Every Worklaw Network member is a local firm with strong ties to the legal and business community that the firm serves, providing knowledge of the local landscape where employers have operations.
The content of this Alert is provided for general information purposes only. It should not be considered legal advice or used as a substitute for consulting an attorney for legal advice.
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