FTC Announces Ban on Non-Competes

[iluvatar5150]

FTC Announces Rule Banning Noncompetes

Today, the Federal Trade Commission issued a final rule to promote competition by banning noncompetes nationwide, protecting the fundamen

www.ftc.gov

Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Existing noncompetes for senior executives - who represent less than 0.75% of workers - can remain in force under the FTC’s final rule, but employers are banned from entering into or attempting to enforce any new noncompetes, even if they involve senior executives. Employers will be required to provide notice to workers other than senior executives who are bound by an existing noncompete that they will not be enforcing any noncompetes against them.​

​

In the final rule, the Commission has determined that it is an unfair method of competition, and therefore a violation of Section 5 of the FTC Act, for employers to enter into noncompetes with workers and to enforce certain noncompetes.​

 

[Pommer]

FTC Announces Rule Banning Noncompetes

Today, the Federal Trade Commission issued a final rule to promote competition by banning noncompetes nationwide, protecting the fundamen

www.ftc.gov

Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Existing noncompetes for senior executives - who represent less than 0.75% of workers - can remain in force under the FTC’s final rule, but employers are banned from entering into or attempting to enforce any new noncompetes, even if they involve senior executives. Employers will be required to provide notice to workers other than senior executives who are bound by an existing noncompete that they will not be enforcing any noncompetes against them.​

​

In the final rule, the Commission has determined that it is an unfair method of competition, and therefore a violation of Section 5 of the FTC Act, for employers to enter into noncompetes with workers and to enforce certain noncompetes.​

A win for “labor”?
Surely this will not stand!

 

[Handmaid for Jesus]

A win for “labor”?
Surely this will not stand!

Why wouldn't it stand?

 

[Trogdor the Burninator]

In the majority of cases, companies were just putting them in for no real reason. Little wonder a lot of people just ignored them. Good on common sense prevailing.

 

[Mayzoo]

Good. I turned down a job due to they required me to sign a non-compete offer as part of the offer. Most told me to sign it and then ignore it, but that goes against my morals.

 

[The IbanezerScrooge]

My very first professional job out of college required me to sign a non-compete agreement. I never understood how they would or could enforce such a thing, but I was young so I signed and actually abided by it. My next job was in a completely different field for 2 years before returning to my degree field.

 

[Desk trauma]

A win for “labor”?
Surely this will not stand!

The first step to communism.

 

[o_mlly]

In the final rule, the Commission has determined that it is an unfair method of competition, and therefore a violation of Section 5 of the FTC Act, for employers to enter into noncompetes with workers and to enforce certain noncompetes.

Non-compete agreements protect proprietary information that an employee gains as a result of employment at the company. Non-disclosure agreements often accompany non-competes but are more difficult to enforce.

Nevertheless, the non-competes are still contracts requiring a quid pro quo. In particular, non-competes that I have signed in the past obligated my employer to continue to compensate me for the duration of my non-compete term. I thought that quite fair.

 

[iluvatar5150]

Non-compete agreements protect proprietary information that an employee gains as a result of employment at the company.

No, they don't, unless they somehow prevent the employee from using that information once the non-compete expires.

What they could, potentially, in-theory, do is provide the employer with some kind of stability by reducing turnover and/or protect their "investment" in an employee that they developed (not unlike how you have to stick around for a while in order to not have to pay back tuition reimbursement).

Nevertheless, the non-competes are still contracts requiring a quid pro quo. In particular, non-competes that I have signed in the past obligated my employer to continue to compensate me for the duration of my non-compete term. I thought that quite fair.

Unfortunately, that is often not the case.

 

[o_mlly]

No, they don't, unless they somehow prevent the employee from using that information once the non-compete expires.

Silly ... just silly. All contracts are void at expiration.

What they could, potentially, in-theory, do is provide the employer with some kind of stability by reducing turnover and/or protect their "investment" in an employee that they developed (not unlike how you have to stick around for a while in order to not have to pay back tuition reimbursement).

More silliness.

Unfortunately, that is often not the case.

Nope. Suggest you update yourself on contract law. You are misinformed.

 

[iluvatar5150]

Silly ... just silly. All contracts are void at expiration.

What I meant is that a non-compete wouldn't protect proprietary information. At best, the non-compete would delay its being exploited.

Nope. Suggest you update yourself on contract law. You are misinformed.

Misinformed on what? That a lot of non-competes don't provide for compensation during the covered period?

 

[o_mlly]

What I meant is that a non-compete wouldn't protect proprietary information.

Nope. The contract does just that.

At best, the non-compete would delay its being exploited.

? That's exactly what the non-compete contract does.

Misinformed on what? That a lot of non-competes don't provide for compensation during the covered period?

Did you do any research at all? Absent an employment contract, a non-compete contract requires that the company provides sufficient economic consideration to the employee who enters into the agreement.

 

[Hans Blaster]

Non-compete agreements protect proprietary information that an employee gains as a result of employment at the company. Non-disclosure agreements often accompany non-competes but are more difficult to enforce.

Nevertheless, the non-competes are still contracts requiring a quid pro quo. In particular, non-competes that I have signed in the past obligated my employer to continue to compensate me for the duration of my non-compete term. I thought that quite fair.

Thus Spake the FTC:

The Commission found that employers have several alternatives to noncompetes that still enable firms to protect their investments without having to enforce a noncompete.

Trade secret laws and non-disclosure agreements (NDAs) both provide employers with well-established means to protect proprietary and other sensitive information. Researchers estimate that over 95% of workers with a noncompete already have an NDA.

 

[o_mlly]

Thus Spake the FTC:

Apparently, you have never attempted to enforce an NDC.

 

[Hans Blaster]

Apparently, you have never attempted to enforce an NDC.

What's an NDC?

 

[Arcangl86]

Nope. The contract does just that.

? That's exactly what the non-compete contract does.

Did you do any research at all? Absent an employment contract, a non-compete contract requires that the company provides sufficient economic consideration to the employee who enters into the agreement.

Absent an employment contract. In many cases, the consideration is simply not terminating the employee if he signs.

 

[iluvatar5150]

Nope. The contract does just that.

? That's exactly what the non-compete contract does.

Delaying is protecting?

Did you do any research at all? Absent an employment contract, a non-compete contract requires that the company provides sufficient economic consideration to the employee who enters into the agreement.

According to whom? (prior to this FTC rule)

 

[o_mlly]

Absent an employment contract. In many cases, the consideration is simply not terminating the employee if he signs.

? Can you clarify or provide a real-life sample of such a contract?

 

[o_mlly]

Delaying is protecting?

Yes.

According to whom? (prior to this FTC rule)

American contract law.

 

[iluvatar5150]

American contract law.

Even assuming you're correct, that doesn't mean that the mere threat of litigation hasn't been sufficient in many cases to obstruct employee movement and have the intended chilling effect.