The Federal Trade Commission Takes Unusual Steps to Shore Up Support on Proposed Rule to Ban Noncompete Clauses

The Federal Trade Commission (FTC) announced it will host a public forum on Thursday, Feb. 16 to examine the FTC’s Notice of Proposed Rulemaking (Proposed Rule) to prohibit businesses from imposing noncompetes on their workers. In its press release regarding the forum, the FTC states that the purpose of the forum is to provide an opportunity for people to directly share their experiences with noncompetes.

On Jan. 5, 2023, the FTC issued a proposed rule seeking to categorically ban nearly all employer noncompetition agreements nationwide. If finalized in its proposed form, the rule would: (1) prohibit employers from entering into virtually all noncompete agreements with all workers, (2) require employers to rescind existing noncompete agreements, and (3) require employers to notify past and current employees that their noncompete obligations are no longer in effect.

The Proposed Rule marks a major shift to the legality and enforceability of noncompete agreements. Employers who have historically included noncompetition provisions in employee handbooks, employment agreements and equity grants will need to make significant changes before the Proposed Rule is implemented.

The Proposed Rule is subject to a 60-day public comment period, which ends on March 20, 2023. It is unusual for the FTC to host a public forum during an open comment period. Based on the FTC’s press release, we anticipate that participants at the virtual forum will speak to the FTC’s belief that noncompetes hurt workers and harm competition by blocking workers from pursuing better opportunities and by preventing employers from hiring the best available talent.

To learn more about the impact of the FTC’s proposed rule and how to protect your employment practices, please contact a member of the Brownstein team. Brownstein Hyatt Farber Schreck’s Labor and Employment and Government Relations teams are prepared to assist employers in preparing comments and with their broader response. To read more about the proposed rule, click here.

THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING THE FTC'S FORUM ON NONCOMPETE RULES. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.