Recent FTC Rule Implements Nationwide Ban on Most Non-Compete Agreements

The Federal Trade Commission recently issued a rule largely banning the use of non-compete agreements nationwide.  The stated purpose of the rule is to address the significant harm non-compete agreements have inflicted on fair competition in recent years.  While several states, including California, already have similar bans in place, the FTC determined that a nationwide rule was necessary as the state-by-state approach did not adequately solve the problem.  

The FTC estimates that approximately 30 million workers are currently covered by non-competes.  By wiping out these agreements, the FTC expects that the final rule will result in reduced health care costs, new business formation, a rise in innovation, and higher worker earnings.  For purposes of the rule, a noncompete is defined as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a…