In Unprecedented Shift, FTC Seeks to Prohibit Noncompete Agreements

The Federal Trade Commission signaled its desire to regulate, and prohibit, noncompete agreements in decisions announced on January 4, 2023. The FTC announced legal action against three companies and two individuals, forcing them to drop noncompete restrictions that they imposed on thousands of workers. Drawing from the FTC’s claimed “substantial expertise” in this space, these actions marked the first time that the agency has sued to halt “unlawful” noncompete restrictions.

According to the complaints issued by the FTC, each of the companies and individuals illegally imposed noncompete restrictions on workers in positions ranging from low-wage security guards to manufacturing workers to engineers that barred them from seeking or accepting work with another employer or operating a competing business after they left the companies. The restrictions involved may or may not have been enforceable in particular states, as normally state law governs such disputes.

Today, the FTC dropped the real bomb: a proposed ban on all employment-related noncompetes. Such an action would constitute a watershed event and change fundamentally how businesses operate in the United States. We will be discussing these developments in further detail in the next issue of the Informed Employer.

If you have questions in the interim, please contact David J. Carr or another member of the Workplace Solutions Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.