Expert Q&A on the FTC’s Proposed Rule Banning Employee Non-Competes

On January 5, 2023, the Federal Trade Commission (FTC) announced and released a notice of proposed rulemaking (NPRM) to prohibit employers from entering into, enforcing, or attempting to enforce non-compete clauses with workers, including independent contractors. The FTC’s proposal would create a new subchapter J, Part 910 of the rules promulgated under Section 5 of the Federal Trade Commission Act premised on the assumption that it “is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker” and therefore falls within the FTC’s domain. The proposed rule broadly prohibits traditional post-employment non-competes and, if finalized and it ever becomes effective, would be a sea change for employers that routinely use non-competes to protect their valuable assets, including trade secrets and goodwill. The NPRM was published in the Federal Register on January 19, 2023 and is subject to a public comment period before it becomes final (Non-Compete Clause Rule (NPRM), 88 Fed. Reg. 3482 (Jan. 19, 2023), to be codified at 16 C.F.R. pt. 910). The FTC has received thousands of comments and most experts anticipate that the proposed rule will be challenged on multiple grounds.

Practical Law Labor & Employment reached out to Peter A. Steinmeyer and Erik W. Weibust of Epstein Becker & Green, P.C. for their insights about the proposed rule and what employers should be doing now to protect their trade secrets and other valuable assets amidst this uncertain legal landscape. Pete and Erik are Members of Epstein Becker & Green. They both focus on trade secrets and employee mobility issues and are two of the co-hosts of EBG’s Spilling Secrets podcast on trade secrets and non-compete law. Pete also was recently appointed to the Practical Law Labor & Employment Advisory Board.