FTC Proposes Rule to Eliminate Non-Compete Clauses

Addressing a high-priority AAHKS advocacy issue, the Federal Trade Commission (FTC) released a proposed rule to eliminate non-compete clauses. Under the proposed rule, all post-employment non-compete clauses would be considered an unfair method of competition and would therefore become unlawful. Employers would be required to rescind any existing non-compete clauses and to notify employees who had been subject to such clauses, in writing, of the rescission. The FTC proposes a straightforward explanation that a “non-compete clause” is “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.” The proposed definition goes further by also providing that it encompasses any “contractual term that is a de facto non-compete clause” and sets forth a functional test for whether a contractual term is a “non-compete clause.” AAHKS is preparing comments on this proposed rule. For more information, read our summary.