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FTC to Vote on Ban on Noncompete Clauses in Employment Contracts

 |  April 17, 2024

The US Federal Trade Commission (FTC) is gearing up to vote on the final version of its proposed ban on noncompete clauses in employment contracts. The commission is set to convene on April 23 in a virtual meeting open to the public, following an announcement made on Tuesday.

Having received over 26,000 comments on the draft rule released last year, the FTC is poised to enact measures aimed at curbing the use of noncompete clauses. The final version under consideration is expected to significantly restrict the practice, with the commission reaffirming its stance that noncompetes are often exploitative, suppress wages, stifle innovation, and hinder entrepreneurial endeavors.

The proposed rule outlines stringent guidelines, including the prohibition of employers from imposing new noncompete agreements on their workforce. Additionally, it mandates the rescission of existing noncompetes within six months of the rule’s adoption. Employers would be required to notify workers that noncompete clauses are no longer enforceable, even for those who have already left the company but remain bound by the terms of the agreement.

This move by the FTC is particularly significant for industries where noncompete clauses are prevalent, such as broadcasting, where on-air personalities and salespeople frequently encounter such restrictions.

If approved, the rule would extend its reach to cover independent contractors and all individuals working for an employer, regardless of their employment status.

Source: FTC Gov