On January 5, 2023, the Federal Trade Commission (FTC) proposed a nationwide ban on non-compete clauses.  The proposed ban follows initial findings by the FTC that non-competes constitute an unfair method of competition, which violates Section 5 of the FTC Act.  This also follows through on President Biden’s 2021 Executive Order on Promoting Competition in the American Economy, which encourages the Commission to take action against the unfair use of non-compete clauses and other potentially restrictive covenants that may unfairly limit workers’ wages and mobility.

The proposed rule includes three main elements:

1. It categorizes all non-compete agreements to be unfair methods of competition and makes it illegal under Federal law to enter into or maintain non-competes with any workers, including employees, independent contractors, externs, interns and volunteers;
2. it requires employers to rescind existing non-competes; and
3. it requires employers to notify current and former employees of the rescission and provides a template for such notices.

The FTC has estimated that the new rule could increase wages by nearly $300 billion per year.  While still subject to a public comment period, finalization and judicial review, if implemented, the new rule would have a seismic impact on employment agreements nationwide.  Naturally, we will keep you informed of further developments.