In the high-stakes world of trucking, the looming threat of serious accident litigation is a constant reality for many companies. When such situations arise, it’s crucial for owners and executives to understand that the future of their company may be at stake. This was a key takeaway from the recent address by Rob Moseley, a
What the FTC’s Proposed Ban on Non-Compete Agreements Means for Employers
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Earlier this year, the Federal Trade Commission proposed a new rule that would bar companies from imposing non-compete clauses on their employees.
What is a non-compete agreement?
Non-compete agreements are legal contracts that prohibit employees from competing with their employers both during and after their employment. Historically, these agreements have been used in employment contracts to ensure that employees do not share trade secrets with the company’s competitors. However, employers use non-compete agreements “to protect their intellectual property, trade secrets, proprietary information, procedures to produce their goods and services, or to maintain their competitive advantage.” These agreements can have many components to them, such as duration, location, and scope. They also can outline financial penalties should an employee violate their agreement.
Who is the FTC?
The Federal Trade Commision, or the FTC, is an independent agency whose main goal is to enforce laws against “deceptive, unfair, and anticompetitive business practices.” Created in 1914, it was first designed to protect against unfair competition in industry. However, the scope of their authority greatly increased in 1938 when Congress passed The Federal Trade Commision Act. That authority expanded again in 1978 when the Act was amended.
What does the proposed rule state?
The new proposed rule seeks to eliminate all non-compete agreements and clauses from employment contracts. The FTC states that non-competes impact American workers negatively by suppressing wages, limiting innovation and entrepreneurship, and reducing American employees’ earnings by the billions. They surmise that by ending non-competes, Americans could see a wage increase by $300 billion annually and “expand career opportunities for about 30 million Americans.” The FTC’s proposed change would disallow businesses to enter into or attempt to enter into a non-compete agreement with an employee. They also would not be able to maintain any previous or current non-compete agreements, and they would not be able to insinuate or imply, in any manner, that an employee is subject to a non-compete.
The proposed rule will not apply to other types of worker restrictions, such as non-disclosure agreements. It also does not affect non-compete type clauses in transaction documents imposed upon workers who own at least 25% of a business as it relates to the sale of said business.
What happens next?
The public is able to make comments regarding the new proposed rule through March 20, 2023. This gives companies the opportunity to offer their opinions on non-compete agreements and how this rule will affect their business.
If the new rule is implemented, employers will have 180 days to reach compliance by rescinding any non-compete agreements it has with current and past employees.
What should you do as an employer?
It is imperative that all of your employee contracts comply with the FTC’s rules and guidelines. Hughes Law Firm specializes in employment law, helping employers navigate complex legal codes and respond to cases as they arise. Call our offices today.
