On January 5, 2023, the Federal Trade Commission (FTC) announced a proposed rule that would ban almost all non-compete agreements between employers and their employees (including independent contractors), on a nation-wide basis. The ban also would include broad non-disclosure, or confidentiality, agreements preventing an employee from working in the same field as its present employer. The one exception would be non-compete agreements that are entered into as part of a sale of a business, but only by persons holding at least 25% ownership interest in the acquired business entity.
The rule is far from being enacted, as it is subject to a 60-day public comment period and likely there will be legal challenges as to whether the FTC has the authority to make such a rule. The FTC’s interest is to increase employees’ job mobility and ability to earn higher wages. The FTC shuns the common practice of businesses having all employees sign a non-compete agreement, regardless of the employee’s level of access to confidential and proprietary business information which the business deems valuable, which the FTC sees as an unacceptable restriction.
New York has taken a similar position in recent years, requiring businesses to stop using non-compete agreements for rank-and-file employees who do not have access to trade secrets or proprietary or confidential information — and if the business does have non-compete agreements with employees having access to such valuable information, the restrictions have to be reasonable in scope and duration.
It is unclear whether the proposed FTC rule will be enacted in its present form (if at all). In any case, a New York Business Lawyer can advise on best business practices. A New York Business Lawyer can help prepare a reasonable, enforceable non-compete agreement by narrowly drafting to reasonably protect legitimate business interests.
The FTC’s proposed “Non-Compete Clause Rulemaking” can be found here: https://www.ftc.gov/legal-library/browse/federal-register-notices/non-compete-clause-rulemaking.
If you have any questions about your existing non-compete agreement or confidentiality agreement or would like to have your company’s non-compete agreements and confidentiality agreements reviewed by a New York Business Lawyer, contact us at 212-688-8944.