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FTC Proposed Ban on Noncompetes


On Jan. 5, the Federal Trade Commission issued a proposed rule that would ban all noncompete agreements with limited exceptions. According to the FTC, the proposed rule would make it illegal for an employer to enter into or attempt to enter into a noncompete with a worker, maintain a noncompete with a worker, or represent to a worker, under certain circumstances, that the worker is subject to a noncompete.

On Feb. 2, ABC hosted a webinar to highlight how the proposed rule will affect members and why the FTC’s action is constitutionally suspect and open to a strong legal challenge.

On Feb. 16, the FTC hosted a public forum examining the FTC’s proposed rule to prohibit employers from imposing noncompetes on their workers. The FTC heard from a series of speakers who have been subjected to noncompete restrictions, as well as business owners who have experience with noncompetes.

On Feb. 28, ABC joined a collation letter to Congress denouncing the rule and encouraging the body to use its oversight and appropriations authority to closely examine the proposed rule.

Continue to monitor Newsline for any further updates on the FTC’s proposed rule.

On April 19, ABC submitted comments in opposition to the proposed ban. In the comments, ABC argued the following: the FTC lacks the statutory or constitutional authority to issue this rulemaking, noncompete agreements are appropriately regulated at the state level, the proposed rule violates the administrative procedure act and a blanket ban on noncompete agreements will harm construction employers and employees.

The comment letter includes survey responses from ABC members who explained the benefit of noncompete agreements and how the proposed ban would have a severe adverse impact on their companies as well as their employees.

ABC also joined the U.S. Chamber of Commerce and 280 business groups in submitting comments urging the FTC to rescind the proposed rule.

Desired Outcome

ABC believes that a universal ban on noncompete clauses is inappropriate and urges the FTC to withdraw the proposal. ABC members have valid business justifications for utilizing noncompete agreements, such as protecting confidential information and intellectual property. This new rule will have a harmful effect on their companies, as well as their employees, and force companies to rethink their compensation and talent strategies. Ultimately, this vastly overbroad rule will invalidate millions of reasonable contracts around the country that are beneficial for both businesses and employees.

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