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.
Status of the FTC’s Coming Ban on Trade Restriction Clauses
Our Pittsburgh noncompete law firm has previously reported on the status of the Federal Trade Commission (FTC) ban non-compete clauses. As we have indicated, the proposed rule (once enacted) would ban all employer-friendly clauses designed to prevent a worker from working for a competitor, even if the word “non-compete” is omitted from the clause. The comment period was extended to April of 2023.
Then the question becomes, what happens now? Did the rule automatically go into effect following comment time period?
Simple answer: no.
The FTC Saga Continues
With the comment time period closed, the next step is for the FTC to take into account the comments and vote on the final version of its proposal to ban on restrictive agreements in employment contracts. Only, there have been plenty of comments.
According to someone familiar with the process, the agency received approximately 27,000 comments concerning the draft rule. This is not surprising. The proposed ban would impact about 30 million Americans. Allegedly, it would increase workers’ wages by nearly $300 billion per year, according to the FTC.
The commission is expected to follow a process similar to rule-making at other federal regulatory agencies. In light of the high number of comments, the FTC will consider changes to the rule once its reviewed the comments, one person hash reported.
Vote on the Final Version of the FTC Ban
It’s been reported that the FTC’s vote — on the final version of its proposed ban — will happen within the next year. However, it will not come until April of 2024, allegedly.
Next Steps Concerning Employment Agreements
Even after the FTC vote occurs, remember a few key things. First, employers will challenge the authority of the FTC to ban work restriction agreements outright, as invading the exclusive province of Congress.
Secondly, the FTC’s coming ban will have no effect whatsoever on trade secret litigation. In fact, employers might actually be more inclined to sue an employee over misappropriating a “trade secret,” since the employee will be free to work for a competing employer.
Third, the same holds true for “non-solicitation” clauses. Here, the FTC’s proposed ban on work restriction agreements will have no effect, once again. An employer wanting to restrain a former employee from working for a competitor might claim the former employee has “solicited” customers or employees of the former employer. This Pittsburgh attorney handling post-separation cases has already noticed an increase in both “trade secret” and “solicitation” litigation following the FTC’s talk about banning non-competes.
PA’s Moves in the Interim
Unfortunately, PA has only “talked tough” about banning work restriction clauses. Until our legislature acts, workers will continue the face this type of litigation for years to come, potentially. Contact a Pittsburgh attorney for prompt assistance.
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