The Federal Trade Commission last month proposed a sweeping ban on noncompete agreements in employment contracts, but opponents say implementation could be delayed or prevented by litigation charging the agency has exceeded its authority.
Others, though, welcomed the move, saying a ban would increase wages and promote economic development in states that don’t already have such a provision.
Employers may have to reconsider how they deal with the issue in light of the FTC activity, experts say (see related story, below).
The insurance sector, which has seen a recent proliferation in employment-related litigation, particularly among brokers, may be less affected than others because companies in the industry usually rely on nonsolicitation or nondisclosure agreements rather than blanket noncompetes. The FTC proposal, though, does create some uncertainty, experts say.
The 216-page proposal issued Jan. 5 would ban employers nationally from imposing noncompetes on their workers, regardless of their salary level, and would apply retroactively. Comments on the proposed rule must be filed by March 20.
Noncompete clauses vary, but they often bar workers from working for a competing company while they are working for or after they leave an employer for a certain period or in a certain region.
The agency said stopping noncompetes could increase wages by nearly $300 billion per year and expand career opportunities for 30 million workers. …
Many observers say the FTC has exceeded its authority.
The agency “doesn’t have the authority to regulate noncompetes whatsoever, much less ban them,” said Erik W. Weibust, a partner at Epstein Becker Green P.C. in Boston. “Noncompetes have been regulated by the states for over 200 years, long before the FTC even existed.” …
Employers on notice
Employers should consider how they may have to change their current policies in response to the Federal Trade Commission’s proposed rule to ban noncompete clauses. …
Erik W. Weibust, a partner at Epstein Becker Green P.C. in Boston, said that even assuming there are no challenges to the rule, it will be at least eight months before it is implemented “and likely to be far longer than that.” He said he is telling clients to “stay the course” and continue to comply with state law.
Mr. Weibust also said that the publication of the proposal “might be an opportunity to have a conversation” as to whether a “full” noncompete is needed or whether a nonsolicitation or nondisclosure agreement might be sufficient.