04/23/2024
❗ Workers--big news from the FTC! 👇
Today, the Federal Trade Commission (FTC) voted 3-2 to issue its Final Rule to prohibit employers from entering into and enforcing most noncompete clauses against workers. A link to the Final Rule is in the comments.
The FTC issued the Final Rule under Section 5 of the FTC Act, which prohibits ‘‘unfair methods of competition,” and under Section 6(g) of the Act, which authorizes the FTC to prevent the use of unfair methods of competition in commerce.
Non-compete clauses have come under increased scrutiny because they chill employee speech, reduce competition in the marketplace, decrease employee mobility, suppress wages, and inhibit new business formation and innovation.
Here are a few of the key takeaways:
✔ The Final Rule will prohibit employers from entering into NEW non-competes with ALL workers.
✔ The Rule broadly defines "workers" to include individuals who are paid or unpaid, and the definition encompasses employees, independent contractors, externs, interns, volunteers, apprentices, sole proprietors who provides services to a person, and individuals who work for a franchisee or franchisor.
✔ The Final Rule will prohibit employers from enforcing or attempting to enforce EXISTING non-competes against workers, except that employers may enforce EXISTING non-competes against senior executives. The FTC found that senior executives, unlike other workers, are more likely to negotiate, and be compensated for, their non-competes.
✔ With respect to workers other than senior executives, employers must rescind, and notify workers that they will not enforce, non-competes after the effective date of the Final Rule.
