On January 5, 2023, the Federal Trade Commission (FTC) issued a Notice of Proposed Rulemaking (NPRM) which, if enacted, would outlaw non-compete agreements for virtually all workers. Specifically, the NPRM identifies non-compete agreements as “unfair methods of competition” which are unlawful under Section 5 of the Federal Trade Commission Act. The only proposed exception is for those selling all or a “substantial” part of a business, an ambiguity likely to be addressed in the future. Importantly, the proposed regulation would not only prohibit employers from using non-compete agreements in the future but would also be applied retroactively, requiring employers to notify workers (and former workers) already subject to non-compete agreements that the agreements are no longer valid.

For employers who use non-compete agreements, this proposed regulation will require significant changes to their current processes and agreements, and also raises serious concerns regarding how employers can and should protect their business interests going forward.

The NPRM is currently under a 60-day regulatory notice and comment period which is set to expire in March. The FTC has invited comments on potential alternatives to the proposed regulations and specifically has sought input on whether different standards should apply to different categories of workers. FortneyScott is currently working with leading trade associations to file comments addressing employer concerns related to the proposed regulation.

If you would like to discuss the potential impact of the proposed regulation on your business, or if you are interested in filing comments with the FTC, please do not hesitate to contact us.