Non-Competes Made Illegal Under Proposed Rule by FTC

The Federal Trade Commission (FTC) issued a sweeping proposed rule on January 5, 2023, that would bar non-compete covenants for workers nationwide. The proposed rule would invalidate existing non-competes and require employers to notify current and former employees that any pre-existing restrictive covenants are no longer in effect. Non-competes entered into in conjunction with the sale of a business would be preserved.

• FTC rules authorize civil penalties of up to $10,000 for each violation that will likely apply to violations following the rule's implementation.
• Business and lobbying groups will likely challenge the proposed rule.
• The FTC is expected to issue a final rule shortly after the 60-day comment period expires. The proposed rule provides that any final rule will become effective 180 days after publication in the Federal Register. The rule (in its current or amended form) could be in place by the third quarter of 2023.

Read the proposed rule here.