The Federal Trade Commission Proposes Rule to Ban Employment Non-Competes.
Today, in an astonishing move, the FTC released a proposed Rule that would ban non-compete clauses from employment contracts. The FTC cited its authority to issue such a rule under Section 5 of the FTC Act, which bans unfair methods of competition.
In its announcement, the FTC estimated that such a rule would increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.
Specifically, the FTC’s new rule would make it illegal for an employer to:
- enter into or attempt to enter into a non-compete with a worker;
- maintain a non-compete with a worker; or
- represent to a worker, under certain circumstances, that the worker is subject to a non-compete.
The proposed rule would require employers to rescind existing non-competes and proactively inform workers that existing non-competes are no longer in effect.
Simultaneously, the FTC announced that it has initiated enforcement actions against three companies for using what it termed “coercive non-competes” on low wage employees. One was a Michigan-based security guard company and the other was against two of the largest U.S. glass container manufacturers.
The public will be able to comment on the proposed Rule for 60 days after the Rule is published in the Federal Register.
Michele is the Managing Partner at M&S and former Chief of the Ohio Attorney General’s Consumer Protection Section. Bringing more than two decades of experience in the consumer protection arena, she advises highly regulated businesses on a wide range of telemarketing, privacy, and other consumer protection matters.