Changes are afoot in the legal world of non-competes. The Federal Trade Commission (FTC) issued a proposed rule in January 2023 that could redefine how non-competes, including those typically agreed upon during a business sale, are treated under competition law. According to a report, this move came as a response to a Presidential Executive Order, posing a serious reconsideration of these agreements as unfair methods of competition, potentially making them illegal.
The FTC’s new rule, once enacted, would not only apply to future non-competes, but also current ones. It lays out requirements for employers to actively inform both current and former employees that their non-competes are no longer in effect and cannot be enforced. This marks an important shift away from the historical perspective on non-compete agreements, which were often used to protect proprietary information and restrict employees’ options after leaving a company.
This development echoes an emerging global trend, with countries reevaluating their stances on non-competes to foster more competition and innovation. These changes could potentially upend decade-long practices and put businesses on a new course of employee rights and corporate competition.
As this rule is still under proposal, the impact remains to be seen. However, its implications are already generating considerable discussion among legal professionals. It serves as another reminder of how rapidly laws can change, underlining the need for corporate entities to remain adaptable and vigilant in this ever-shifting legal landscape.