FTC Rule Bans Noncompete Clauses – IOTW Report

FTC Rule Bans Noncompete Clauses


U.S. companies would no longer be able to bar employees from taking jobs with competitors under a rule approved by a federal agency Tuesday, though the rule is sure to be challenged in court.

The Federal Trade Commission voted Tuesday 3-2 to ban measures known as noncompete agreements, which bar workers from jumping to or starting competing companies for a prescribed period of time. According to the FTC, 30 million people — roughly one in five workers — are now subject to such restrictions. More

3 Comments on FTC Rule Bans Noncompete Clauses

  1. Banning non-compete agreements has been the rule in California for many years. The primary exception is that a non-compete can be valid in the course of selling one’s equity interest in a business.

    In terms of protecting employers, employers can designate certain information as “confidential,” and restrict the use of that information for a period of time. For example, if a business takes steps to keep its customer lists confidential, former employers can be banned from using these lists in starting their own business or using that information for another company. There is something called the Uniform Trade Secrets Act which most states have adopted, and which is designed to restrict the use of confidential business information by former employees. These are not non-compete agreements except to the extent that the competition must be fair and not use a former employer’s confidential business information.

    This is probably too much information, but non-compete agreements are frequently abused by employers, and this is one of the few instances where I agree with the California approach.


Comments are closed.