Written by Haim Ravia and Dotan Hammer
The United States Federal Trade Commission (FTC) has published a proposal for new regulations that would prohibit employers from having their employees sign any provision in the employment agreement that prevents the employees from working with the competitor, whether or not briefly. The FTC announced that it has determined that these terms constitute an unfair practice against the competition, in violation of the Federal Trade Act. The Commission hopes that the new regulations will expand the employment opportunities of 30 million Americans and increase their wages by a cumulative amount of 300 billion dollars annually. According to the FTC’s announcement, employee non-compete clauses are not limited to the technology sector. It is a cross-industry measure across employee ranks, from hair stylists to doctors, warehouse workers, and managers.
The new rules will also apply to consultants and service providers. They will require companies to repeal existing non-compete clauses within 180 days of the regulations’ approval and notify employees that they are no longer in effect. The new regulations will not apply to other restrictions, such as confidentiality agreements unless they are drafted so broadly that they amount to a non-compete. The new regulations will also not apply to non-compete clauses with business owners that sell their business, to which the ordinary laws on competition and antitrust will continue to apply.
Click here to read the press release of the Federal Trade Commission.
Click here to read the proposal for new regulations published by the Federal Trade Commission.