The FTC is Considering Banning Non-Compete Agreements: What Would This Mean for Employees?

Companies have long required their employees to sign non-compete agreements, ostensibly to protect proprietary information from falling into the hands of their competitors. Over the past several years, a growing number of companies have started to weaponize non-compete agreements to keep employees from disclosing adverse working conditions, discriminatory practices, and salary disparities. This practice has put non-compete agreements on the Federal Trade Commission’s (“FTC”) radar and the FTC is now considering rules to impose a ban on new non-compete agreements and to invalidate existing agreements.

Regardless of whether this ban is adopted, if your employer is using a non-compete agreement as a shield to hide workplace discrimination and other unfair employment conditions, you have rights that will protect you from improper termination if you expose these illegal practices. If your employer has threatened to sue you for violating a non-compete or non-disclosure clause, reach out to The Noble Law to make sure your rights are protected.

What types of restrictions do non-compete agreements typically include?

Non-compete clauses are often found in broader confidentiality agreements that impose restrictions such as:

  • The employee may not work for a competing entity for a certain duration after an employee leaves his or her current job
  • The employee may not contact the employer’s actual or prospective customers on behalf of another company
  • The employee may not solicit other employees to leave their employment to join another company
  • The employee may not disclose any terms of his or her employment or any information about working conditions
  • The employee may not publish or make disparaging comments about a former employer
  • The employee may not accept employment with any company located within a certain distance of a former employer

Currently, different state laws govern the enforceability of these and other post-employment restrictions. The FTC’s proposed ban on non-compete agreements would enact uniform rules to prevent employers from certain non-compete practices.

How do employers use non-compete agreements to the detriment of their employees?

An employee who is working under discriminatory or other adverse conditions might want to terminate his or her employment and find a new job. If that employee is subject to a non-compete agreement, they may be reluctant to leave out of fear that the employer will broadly interpret that agreement to prevent employment with any other companies. An employer might take advantage of this situation to pay the employee lower wages or to impose less favorable working conditions.

Employees who find themselves in these or similar circumstances should not wait for the FTC to finalize its ban but instead should promptly consult with a workplace discrimination lawyer who can review a non-compete agreement and determine if there is a valid cause of action to challenge it under the existing laws.

Who will be protected if the FTC adopts a ban on non-compete agreements?

In its current form, the FTC’s proposed ban on non-compete agreements would apply to all employees and independent contractors, regardless of their status with the employer. It includes a narrow exception for certain classes of company owners who sign non-compete agreements when they sell the company to another entity.

Non-compete agreements for highly compensated executives may also be exempt from any final rules.

The FTC is accepting comments on the proposed ban through the first calendar quarter of 2023. While the adoption of any final rules is far from certain, this appears to be a positive sign that the use of non-compete agreements to underpay employees and justify discriminatory practices may finally be coming to an end.

Of course, even if the rule does pass, companies will rightly still have mechanisms available to protect their confidential and proprietary information and their relationships with their clients and customers.

Protect Your Rights as An Employee

If your employer is taking advantage of you and is holding a non-compete agreement over your head to justify unfair treatment, do not hesitate to call The Noble Law for an assessment of your rights as an employee. We’re here to listen to your story, evaluate your options, and take action to get your career back on track.

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