Status of FTC Ban on Employment Restriction (May 2023)

UPDATE:  On April 23, 2024, the Federal Trade Commission has banned enforcement of noncompete agreements in employer-employee contracts.  Click here for more.  This article had been written prior to the ban.  

 

Pittsburgh office, where our lawyers evaluate statue of noncompete ban Our Pittsburgh lawyers have previously updated you on the status of the coming Federal Trade Commission (FTC) ban on non-compete agreements.  We reported that the public would have a chance to comment on the proposed ban until March 20, 2023.  However, by a vote of 4-0, the FTC extended the comment period until April 19, 2023.  In fact, full implementation of the rule could take years. The rule will almost certainly be litigated.  In the interim, employers may continue enforce non-compete agreements, subject to state law.  

Rationale for the Proposed Ban on Non-Compete Agreements 

Here's the FTC's stated reasoning for the ban, per the FTC's March 6, 2023 blog post: 

The proposed rule, announced by the FTC in January of this year, is based on a preliminary finding that noncompetes constitute an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act. Information on how to submit comments can be found in the Federal Register notice.

Further Delays on Implementing the Ban on Non-Competes

The FTC's Commissioner, Christine S. Wilson, hinted that she would extend the comment period even longer.  She issued a concurring statement, with the 4-0 vote to extend the comment period, indicating:  

The Commission also received requests that the comment period not be extended. ... I would have supported extending the public comment by 60 days. I continue to encourage all interested parties to comment on all issues and alternatives to the proposed rule that are identified in the Notice of Proposed Rulemaking.

Look For Employers to Pivot Toward Other Methods to Control Former Employees

With the ban on non-competes coming, eventually, look for employers to get creative to limit their employees' ability  to work for a competitor. Look for employers to ask employees to sign trade secret agreements, characterizing nearly all of the employer's information a trade "secret," even though, statutory, only certain information that the employer spend money developing -- such as customer lists -- can constitute a protectable "secret."  

Also watch out for non-solicitation agreements, which will remain enforceable even if a non-compete ban takes place. Employers are expected to get aggressive about accusing former employers of "soliciting" customers or current employees of the former employer. Employees must be very careful communicating with anyone associated with a former employer. 

Contact Our Pittsburgh Lawyers To Review any Non-Compete

Our Pittsburgh attorneys are here to provide a consultation about any breach of contract matter involving: a noncompete agreement, trade secret, or non-solicitation clause matter in Western Pennsylvania. 

Call Today!

412.342.0992

Or Email