Federal Trade Commission Proposes Rules Banning Non-compete Agreements

Federal Trade Commission Proposes Rules Banning Non-compete Agreements

By: Brandy Boone, General Counsel

On January 5, 2022, a year and a half after President Biden signed an executive order encouraging the Federal Trade Commission (“FTC”) to limit or ban non-compete agreements, the FTC announced a proposed rulemaking that will prohibit employers from using non-compete agreements that restrict where an employee, or independent contractor, can work after leaving employment. 

The Rule will not only ban the use of non-compete agreements in future employment or contractor relationships, but it will also require employers with current non-compete agreements to notify employees or contractors that the non-compete agreements are rescinded and no longer in effect.  The FTC cites the unfairness of non-compete agreements as a method of competition as the primary reason for the rule, but also estimates the proposed rule could increase worker earnings by almost $300 billion per year, save up to $148 billion on annual health costs, and increase the number of companies within the same industry. 

Specifically within the healthcare industry, this change will likely lead to more competition between hospitals and ambulatory surgical centers for physician employees and contractors. The FTC’s proposed rule seeks public comment, particularly in three areas, (1) whether franchisees should be covered under the rule; (2) whether senior executives should be covered under the rule; and (3) whether the rule should affect low and high wage workers differently.  The public comment period will last 60 days from the date that the proposed rule is published in the Federal Register, and although the notice of rulemaking was announced on January 5th, it has not yet been published in the Federal Register. 

You can read the rule here and a fact sheet summarizing the rule here.

Posted in: Legal Watch

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