The Federal Trade Commission (FTC) announced its intent January 5 to ban the use of non-compete clauses in employment contracts by initiating a rulemaking. A non-compete clause is a contractual term between the employer and an employee that prohibits the employee, under certain circumstances, from going to work for a competing employer or starting a competing business, typically within a certain geographic area and period of time after the employment arrangement ends.
According to the FTC, about one in five American workers or approximately 30 million people are bound by a non-compete clause and are thus restricted from pursuing other employment opportunities. Non-compete agreements are nothing new. They’ve long been used in settings where there are trade secrets, client/customer lists and things where there is a need for protection.
They have also been frowned upon by the courts in certain professions (like doctors and lawyers) where there are needs for services. This proposal can cut both ways. If you’re an employer looking for employees, this proposal may not be so bad. If you’re an employer trying to retain key workers, this proposal could hurt you. There’s plenty of time to submit comments on this issue as the comment period closes March 10.
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