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The FTC Proposes Rule to Ban Noncompete Clauses for all US Workers

Jan 11, 2023

On January 5th, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that would ban employers from imposing either existing or prospective noncompete clauses on their employees. The proposed rule covers all employees regardless of industry or employer size, with minor exceptions in the sale of a business. The proposal is subject to a 60-day public comment period commencing when the FTC publishes the proposed rule. You can find the text of the proposed rule here.


The FTC’s Proposal

As stated above, the FTC’s proposed rule applies to all employees and to all noncompete clauses or agreements, whether prospective or existing. The rule would require employers to rescind all existing noncompete clauses and inform both former and current workers that their noncompete clauses are no longer in effect. This recission would be required to occur no later than 180 days after the FTC’s final rule is published. The only exception to the ban permits noncompete clauses entered into by a person who is selling a business or disposing of an ownership interest in a business entity in which the individual holds at least a 25% interest.


Although the proposed rule does not put an outright ban on other restrictive covenants, such as non-solicitation or no-hire provisions, it does ban “de facto” noncompete clauses that are “written so broadly that it effectively precludes the worker from working in the same field.” The proposed rule would overrule any state statute, regulation or order that is inconsistent with the rule.


Takeaways

The FTC’s proposal would be a sea change for restrictive covenants in employment. Employers need to be wary of the proposed rule’s ban on “de facto” noncompete clauses, as it is not clear by the FTC’s proposed rule what type of agreements and clauses this could entail. However, there is still time for comment on this rule until 60 days after the FTC’s publication of the proposed rule. Interested parties may file a comment online at https://www.regulations.gov, or on paper by mailing the comment to Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex C), Washington, DC 20580. Given the potential impact of this rule on employers’ existing and prospective restrictive covenants, employers should contact counsel to determine the agreements and clauses that could be at risk.


If your business has any questions on this or any other matters, please do not hesitate to contact the attorneys at The Royal Law Firm at 413-586-2288.

ALERT: EEOC Releases Workplace Guidance to Prevent Harassment

01 May, 2024
On April 29 th , 2024, the U.S. Equal Opportunity Commission (EEOC) finalized their guidance in harassment in the workplace after receiving and responding to nearly 38,000 public comments on the proposed guidance released on October 2, 2023. The renewed guidance provides numerous clarifying hypotheticals, and addresses more recent issues including protections for LGBTIQA+ employees and remote work. Of note, the EEOC clarified the scope of sex discrimination and harassment, stating that federal protections under Title VII extend to LGBTIQA+ employees. Specifically, the EEOC made clear that the scope of harassment extends to repeatedly and intentionally misgendering employees or denying access to bathroom facilities that align with their gender identity. Further, this guidance reminds employers that discrimination and harassment based on “sex” includes harassment based on pregnancy, childbirth and related medical conditions, which include employees’ decisions related to contraception and abortion. Several public comments suggested that these guidelines infringed on free speech and religious rights. The EEOC did not directly address these concerns, instead stating that free speech and religious rights issues are fact-specific and would be addressed on a case-by-case basis. Further, the EEOC updated guidance related to the remote work environment. The EEOC clarified that conduct in a virtual work environment, including electronic communications using private phones, computers, or social media accounts can contribute to a hostile work environment if they impact the workplace. The EEOC also clarified that conduct occurring outside of the workplace, including on social media, which does not target the employer or its employees and is not brought into the workplace generally will not contribute to a hostile work environment. Finally, the EEOC updated its Anti-Harassment Policy Requirements, stating that an anti-harassment and discrimination policy should be widely disseminated to employees, in a manner that is understandable by all employees and includes i) a definition of prohibited conduct, ii) a requirement that supervisors report harassment, iii) multiple avenues for reporting harassment, iv) a statement that clearly identifies accessible points of contact for reporting purposes, and v) an explanation of the complaint process, including adequate anti-retaliation and confidentiality protections, and prompt and effective investigation and corrective action. You can read more about the EEOC's ruling on their website by clicking here . If your business has any questions on this topic or any other matters, please do not hesitate to contact the attorneys at The Royal Law Firm at 413-586-2288.

Non-Compete Agreements Are in Jeopardy

26 Apr, 2024
On April 23, 2024, the Federal Trade Commission (“FTC”) issued a final rule banning non-competition agreements for all employees except for very narrow exceptions. The FTC’s Final Rule banning all non-competition agreements is effective 120 days after its publication in the Federal Register, which is expected in the next few days.  As of the effective date, all non-competition agreements are banned, except for franchisor/franchisee relationships and for sales of a business between buyer and seller. The FTC’s Rule is retroactive, prohibiting certain non-competition agreements before the effective date of the Rule as well. Existing non-competition agreements can remain in effect as to senior executives, which are defined in the Rule as employees in “policy-making positions” making at least $151,164 annually. The FTC’s Final Rule is already being challenged through the court system and a challenge from the Chamber of Commerce will most likely follow suit. Therefore, if an employer has existing non-competition agreements, the employer may not need to rescind them just yet. Stay tuned for updates as these challenges take their due course.
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