The Federal Trade Commission (FTC) made history last week when it passed a new rule that fundamentally alters the landscape of employment agreements across the U.S. The agency’s noncompete rule adopts a comprehensive prohibition on the use of noncompete clauses in any industry with any worker, including those at senior executive levels. The rule is promulgated using the FTC’s authority to determine practices that are unfair methods of competition. For those like me who have long argued against the use of noncompetes, this moment has been a long time coming.
The FTC’s Noncompete Ban Was Long Overdue
Empirical evidence backs up the argument that trade secrets can remain protected even as talent is freely mobile.
May 06, 2024
Holloway/Getty Images
Summary.
The FTC’s new noncompete rule adopts a comprehensive prohibition on the use of noncompete clauses in any U.S. industry with any worker, including those at senior executive levels. The rule is promulgated using the FTC’s authority to determine practices that are unfair methods of competition. For those who have long argued against the use of noncompetes, this moment has been a long time coming. While the rule already faces legal challenges, company leaders would be well advised to make sure they understand what’s in the rule, its potential impact, and what it could mean for employees. Far from being an anti-business rule, the ban on noncompetes stands to spur innovation and grow markets.