Podcast - Exploring the FTC's Aggressive Effort to Limit Employment Agreements

This is Tony DiResta, and I want to welcome you to our fifth podcast of "Clearly Conspicuous." As we've noted in the previous sessions, our goal in these podcasts is to make you succeed in this aggressive current regulatory environment, make you aware of what's going on with both federal and state consumer protection agencies and then give you practical tips for success. It's a privilege to be with you today. 

FTC's Proposed Rule

Today we talked about the FTC's aggressive effort to limit employment agreements in all industries and for all workers. The topic is the FTC's proposed rule to ban non-compete clauses in employment agreements. Last month, the Federal Trade Commission issued a notice of proposed rulemaking concerning the FTC's initiative to prohibit employers from entering into non-compete clauses with their workers. The rule would extend to all workers and would require companies to rescind existing non-compete within 180 days of the final rule. For purposes of the rule, non-compete provisions include explicit and de facto non-compete agreements. This includes non-disclosure agreements written so broadly as to effectively ban working in the same field post-employment, as well as clauses that require paying unreasonable training costs if the employment terminates within a specified period. The stated intention behind the proposal is to benefit workers and encourage competition, according to FTC Chair Khan. About one in five Americans today is bound by a non-compete. With the figure soaring in certain industries, up to 45 percent, for example, in tech, any change to existing law would have broad and sweeping business impact. It affects all industries. Every company that has non-compete with employees, with the exception of companies that want to prevent an owner or partner who is selling a business from immediately reentering the field, which would be exempt under the proposed rule. It matters. The proposal, if implemented as proposed, would bar employers from entering into or enforcing non-compete with employees or independent contractors, while also requiring companies to nullify any existing non-compete within six months. Adoption of the rule could have wide-ranging consequences, from fueling more trade secret litigation to altering the dynamics of pay negotiations for top executives and key employees.

Questions to Consider When Submitting Comments

You can submit a public comment opposing this proposed rule. Some questions to consider: 

1. Do you wish to consider submitting comments on only your company’s behalf, or do you wish to consider joining in the comments with other companies?
2. Do you wish to focus comments based on issues specific to your company, issues specific to your industry or issues specific to particular aspects of the rule or the FTC’s proposed alternatives?
3. With respect to the rule, are there particular aspects of the rule that you wish to address?
4. With respect to the FTC’s proposed alternatives to the rule, are there aspects of the alternatives that you wish to address?

Do you want to challenge the rule in comments? There are a variety of legal arguments to challenge the proposed rule, and you may want to take a look at FTC Commissioner Christine S. Wilson's dissenting opinion against the rule.

Key Takeaways

Here are the key takeaways. Your ability to have non-compete clauses in your employment contracts may end. Comments are very important. Please let me know if you'd like to discuss or if you'd like to speak about me and the team to coordinate any comments you may wish to provide. Stay tuned for further programs as we identify and address the key issues and developments on these issues. I wish you continued success and a meaningful day. Thank you so much.