FTC's Proposed Rule Banning Noncompetes: Understand the Groundbreaking Implications for Employers and Employees

On January 5, 2023, the Federal Trade Commission announced a groundbreaking proposed rule, which would ban employee noncompetes. The proposed rule, if enacted, will completely change the landscape on restrictive covenants and trade secret protection. Not only would employers be unable to use or enforce noncompetes, they would be required to take steps to rescind existing noncompetes and notify employees that they are no longer enforceable. The proposed rule, which President Biden urged the FTC to adopt, purports to preempt all state law on noncompetes, including centuries of case law and significant recent state legislative efforts.

Employers and employees need to be aware of and begin to plan for the possible adoption of the proposed rule (or a revised version thereof). Interested parties should also take advantage of the 60-day period to comment to the FTC on the proposed rule. This fast-track program is designed to assist lawyers in advising their clients in planning for compliance.