The Federal Trade Commission (FTC) has announced a proposed rule that would essentially ban all non-compete agreements between businesses and their employees, as well as any independent contractors engaged by the business. This would also extend to non-disclosure agreements that are drafted so broadly as to essentially preclude the worker from working in the same field. As proposed, the only exception would be in connection with the sale of a business or otherwise disposing of all of the person's ownership interest in the business entity.

While the rule is far from final – and is subject to both public comment and legal challenges – the impetus for the rule appears to be the desire to eliminate the common practice across many businesses of having all employees sign a non-compete, regardless of their level of access to confidential and proprietary business information, which the FTC sees as an unacceptable restriction on worker mobility and as depriving workers of higher wages and better working conditions. New York has already taken that position in recent years, requiring businesses to stop using non-competes for employees who do not have access to trade secrets or confidential information (such as most restaurant or retail workers, cleaners, administrative staff and lab techs).

It remains to be seen whether the proposed FTC rule will ultimately take effect, and if so, the scope of non-competes the final rule would ultimately ban or restrict. However, this proposed rule is a good reminder that currently, to be enforceable, non-competes must be narrowly-tailored to reasonably protect legitimate employer interests.

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If you have questions or would like additional information, please contact our Labor & Employment attorneys or the primary EGS attorney with whom you work.