UPDATES FOR FTC’S PROPOSED NON-COMPETE RULE

In March, we published a summary of the Federal Trade Commission’s proposed rule to effectively ban non-compete agreements across almost all industries. Earlier this year, the FTC sent shockwaves throughout the labor market after announcing a new proposed rule that would prevent employers across nearly every industry from entering into any non-compete agreement with an employee, with very limited exceptions. If the FTC chooses to issue a final rule, its provisions would not be enforceable until six months later, and any final rule is expected to face significant litigation and opposition. 

The comment period for the proposed rule was extended by 30 days and officially closed on April 19, 2023. The FTC reported receiving nearly 27,000 public comments on the proposed rule. Many comments spoke out in support of the proposed rule, including a letter from 12 U.S. senators and 52 U.S. House Representatives. 18 state Attorneys General also submitted a public comment supporting the FTC’s effort to benefit low- and middle-wage workers and encourage fair competition and innovation. Other groups, including the U.S. Chamber of Commerce and the American Hospital System, have submitted comments in opposition to the proposed rule, arguing that it will inhibit companies from protecting trade secrets. 

A Bloomberg Law article reports that by late February 2023, the FTC had spent nearly 6,000 hours and $500,000 on the rulemaking. Given the significant labor needed for the rulemaking, the high number of comments received, and anticipated challenges to a final rule, the FTC is not likely to vote on the proposed rule until April 2024. Therefore, any final version of the proposed rule could take effect, at earliest, in October 2024. While 15 months may seem like a long timeline, employers should continue taking action now to take stock of current non-compete agreements and review policies and procedures for entering into such agreements in preparation for publication of a final rule.