FTC Proposes Rule to Ban Non-Compete Agreements

Jan 20 2023

Amanda DeMatteis: Hi, Josh!

Josh Goodbaum: Hi, Amanda! What’re we going to talk about today?

DeMatteis: Let’s talk about non-competes. Of course, we’ve talked about them before, but there’s actually some promising news not only for Connecticut employees, but also employees across the country. What can you tell us about that?

Goodbaum: This is huge news on the subject of non-competes, Amanda. In early January 2023, the Federal Trade Commission (FTC), which is an agency of the federal government that is charged with ensuring fair competition, including by enforcing the nation’s antitrust laws, issued what’s called a Notice of Proposed Rulemaking that proposed a rule that would effectively ban non-competes across the country.

Now, according to the Federal Trade Commission, non-competes function to inhibit competition by lowering wages, by limiting the free movement of labor, and by preventing entrepreneurs from starting their own companies – it kills innovations, it stops new companies that can compete from growing.

So, this proposed rule is really good news for employees, right?

Well, not so fast.

For one thing, the rule hasn’t been issued yet. It’s just a proposed rule. A Notice of Proposed Rulemaking is the first step in the administrative rulemaking process. There’s a 60-day comment period during which the public can weigh in and say whether it thinks this rule is a good idea or not. Then, the agency has time to go back to the drawing board and issue what’s called a Final Rule. That rule then would have the force of law. And of course, it’s not clear at this point – because we’re just in the middle of the process – whether the final rule will have the same content as the proposed rule. It might do something different.

But even if the proposed rule becomes a final rule – assuming it’s got basically the same content – there are very likely to be legal challenges, including from powerful corporate interests like the U.S Chamber of Commerce. And there are lots of potential avenues for a lawsuit that would challenge this rule, including especially that the statutes that establish the Federal Trade Commission don’t allow that agency to issue this kind of rule. And that litigation is likely to go on for quite some time, during which the regulation probably wouldn’t be in effect.

So, the takeaway of all of this for Connecticut employees is: Nothing has happened yet. If you’re a Connecticut employee with a non-compete, you still have a non-compete. This action by the Federal Trade Commission doesn’t change anything. And in fact, if you want to support sensible reforms about non-competes, the best thing you can do as a Connecticut employee is to reach out to your Connecticut state legislator – your Connecticut representative or your Connecticut senator – because the Connecticut General Assembly, which makes laws for just Connecticut, is in session right now. And it’s likely to consider a bill that would reform how we deal with non-competes here in Connecticut.

DeMatteis: And those bills have been floating around in Connecticut for quite some time, right, Josh?

Goodbaum: It’s been a few years that the General Assembly has been considering different proposals to reform how we handle non-competes in Connecticut to try to bring some more certainty and predictability to this area of the law, and there might be some momentum to get that done. So, if that’s something you’re in favor of as a Connecticut employee, certainly reach out to your elected representatives and let them know. And meanwhile, if you have any questions about your specific non-compete, you can search our website for more information or you should feel free to give us a call. We’d be happy to help.

DeMatteis: That’s great information. Thank you, Josh! And thank you for watching.

Goodbaum: Thank you!

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amanda dematteis on the ftc proposed rule on non competes

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