A guide from The HR Digest breaks down commonly asked questions about the Federal Trade Commission’s proposed rule on noncompete agreements. Comments on the proposed rule are due April 19.
04/04/2023 2:35 P.M.
2.5 minute read
The HR Digest recently released a guide to help companies understand the Federal Trade Commission’s proposed rule on noncompete agreements.
The proposed rule seeks to ban employers’ noncompete agreements and rescind existing agreements in an effort to increase wages and expand career opportunities for workers in the U.S., ACA International previously reported.
Specifically, the FTC says the new proposed rule could increase wages by nearly $300 billion annually and grow career opportunities for about 30 million Americans, according to a news release.
The proposed rule would prohibit employers from:
- Entering into or attempting to enter into a noncompete with a worker;
- Maintaining a noncompete with a worker; or
- Representing to a worker, under certain circumstances, that the worker is subject to a noncompete.
If the proposed rule is adopted, companies would have 180 days to cancel any existing noncompetes and to notify current and former employees of the rescission, according to the HR Digest article.
The guide goes on to answer a number of questions, including:
- “Why exactly is the FTC so eager to implement this new rule? What’s driving their motivation here? It seems the FTC wants to crack down on noncompete agreements that they believe unfairly restrict workers and hamper competition. Specifically, the FTC worries these agreements make it hard for employees to switch jobs and advance their careers, as well as difficult for new companies to attract top talent and break into industries where key workers are locked into their existing jobs.
- Will this decision affect ongoing private lawsuits seeking compensation? The proposed rule should not affect ongoing private lawsuits seeking compensation. The proposed rule does not establish a private right of action or change the well-established standards for Sherman Act claims.
- What types of deals would the proposed regulation impact? The proposed rule would ban contracts that prevent employees from working for competitors after leaving a job. It applies to obvious noncompete agreements as well as broader agreements that achieve the same result. Banning these ‘de facto’ non-competes will likely lead to more lawsuits over trade secrets because companies can no longer rely on non-compete agreements to protect proprietary information.”
Read the guide to get answers to many other questions regarding the proposed rule.
Submit Comment on the Proposed Rule
Most recently, the FTC extended the public comment period for the proposed rule after trade associations representing several industries, including ACA , requested a60-day extension, ACA previously reported.
The comment deadline is now April 19, 2023, instead of March 20.
The organizations seeking an extension of the FTC’s comment period by 60 days said the extra time is needed to assess the potential consequences of the rulemaking and develop insightful comments, according to the request (PDF).
For questions on the proposed rule or to provide input for ACA’s comments, contact ACA’s advocacy team at [email protected].
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