On January 5, 2023, the Federal Trade Commission (FTC or Commission) announced a notice of proposed rulemaking that would ban employers from entering non-compete agreements with their employees. Under proposed rule 16 CFR § 910, it would be an unfair method of competition (UMC) in violation of Section 5 of the FTC Act for an employer to enter, or attempt to enter, a non-compete clause with paid or unpaid staff or independent contractors.
The proposed rule marks a significant step in the FTC’s plans to use its rulemaking authority to sanction conduct it views as deleterious to workers and the economy. As written, it is also a radical departure from current federal antitrust law, which calls for an assessment of the competitive effects of the non-compete clause in a relevant market to determine whether it is unlawful.
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