The Federal Trade Commission (FTC) has issued a Notice of Proposed Rulemaking for its proposed rule that would essentially prohibit employers from entering into noncompete agreements with any employee, independent contractors, interns, volunteers, and other types of workers. The FTC’s self-described mission is “protecting the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research, and education.” This proposed rule is the latest example of the FTC, under the direction of Chair Lina Khan, attempting to control corporate power and influence. Since Khan took over control of the agency in June 2021, the FTC has challenged the Microsoft-Activision merger, worked with the Justice Department to force Epic Games Inc., developer of the popular video game Fortnite, to agree to massive privacy law violation penalties, and filed a lawsuit to block Meta from buying a virtual reality start-up.
Generally, noncompete agreements prevent an employee from joining a competitor or starting a competitive business for a specified period of time. Often, noncompete agreements are limited to a geographic area. Many states regulate noncompete agreements in a variety of ways, including through income levels and notice requirements, but this new federal rule would supersede any state or local law that expressly allows for such restrictions.
The FTC estimates that approximately 30 million people are bound by noncompete agreements. Continue reading