The Federal Trade Commission (FTC) is taking steps to ban non-compete clauses in employment contracts. A non-compete clause prevents an employee from going to work for a competitor, even if the employee is fired from their job. Non-competes are found in employment contracts and severance agreements. They discourage employees from starting their own businesses or taking better jobs. When an employee has a non-compete clause, a former employer can sue them for breaking the contract. This is often very unfair and expensive for the employee who cannot pay large attorney fees and court costs to defend themselves.
The FTC’s proposal aims to protect competition and innovation by prohibiting the use of non-compete clauses in nearly all employment contracts. An exception would apply to non-competes that relate to a sale of a business.
The final rule would revise existing employment contracts to remove the non-compete language.
The FTC’s final rule is a major victory for workers and small business owners, who will now be able to compete and innovate without fear of retaliation from their current or former employers. The rule will also promote entrepreneurship and innovation by allowing employees to start their own businesses or work for competitors without facing legal consequences.
If you have a non-compete clause in your contract, Buchanan Law is available to review your contract and provide advice as to how this proposed rule may impact you. We expect that a final rule will be issued later in 2022.