https://www.ftc.gov/legal-library/browse/rules/noncompete-rule Under the final Noncompete Rule, the FTC adopts a comprehensive ban on new noncompetes with all workers, including senior executives. The final rule provides that it is an unfair method of competition—and therefore a violation of Section 5—for employers to enter into noncompetes with workers. Note: The regulation's effective date is 120 days after Federal Register publication - not after the FTC's public announcement. For existing noncompetes, the final rule adopts a different approach for senior executives than for other workers. For senior executives, existing noncompetes can remain in force. Existing noncompetes with workers other than senior executives are not enforceable after the effective date. Fewer than 1% of workers are estimated to be senior executives under the final rule. Specifically, the final rule defines the term “senior executive” to refer to workers earning more than $151,164 who are in a “policy-making position.” The FTC estimates that banning noncompetes will result in: Reduced health care costs: $74-194 billion in reduced spending on physician services over the next decade. New business formation: 2.7% increase in the rate of new firm formation, resulting in an additional 8,500 new businesses created each year. Rise in innovation: an average of 17,000-29,000 more patents each year. This reflects an estimated increase of about 3,000 to 5,000 new patents in the first year noncompetes are banned, rising to about 30,000-53,000 in the tenth year. This represents an estimated increase of 11-19% annually over a ten-year period. Higher worker earnings: $400-$488 billion in increased wages for workers over the next decade. The average worker’s earnings will rise an estimated extra $524 per year. Next Steps The final rule will become effective 120 days after publication in the Federal Register. Once the rule is effective, market participants can report information on a suspected violation of the rule to the Bureau of Competition by emailing noncompete@ftc.gov .
Yeah, but the US Chamber of Commerce is challenging. This will end up in the Supreme Court, likely. I don't necessarily have a non compete, but have had friends affected by them. What I have (for a very short time) is a contract that places a value on further education, if I leave. Some states are trying to strike that down, as well, because in the medical field(probably among others), this is weaponzied and sometimes extends to required training.
Glad to see this. It will change the broadcast industry quite a bit where noncompete clauses are very common.
This is intriguing. I have no real opinion on it so I am just gathering info If I have a company making the Best Widgets I bring in employees and they learn my super secret process They can then leave and go to my competitor and give the process to them? Immediately? The Patent system was suppose to allow inventors to profit from them inventions Yes It is broken but the ideal was that If I spent Millions in R&D then I could reap some rewards for some time Now . . . Someone in my company can catch other companies up almost immediately without that company ever spending a dime on R&D? (Trade Secrets etc etc more than patents) Rocket River just spitballing and trying to see where this will land
I think non-competes are important actually and should not be illegal. They should, however, be limited significantly in what they can actually stop you from doing. Having a non-compete that says you can't work in an industry for x number of years is insane.
Certainly some employers abuse non-competes, but they have a proper place in some situations IMO. I hope the courts are reasonable and don't support banning them.
Yeah, you shouldn't be able to share privileged or exclusive info when poached by a competitor, but the company shouldn't be able to outright own you for x amount of time.
THE FOLLOWING IS JUST MY COMMENTARY ON THIS ISSUE AND NOT LEGAL ADVICE!!!!!!!!!!!!! "Stealing" proprietary information is always a no-no, regardless of whether there's a non-compete agreement. Companies tend to cover those with non-disclosure agreements anyway. This whole thing is super interesting to me. This is the one issue in the areas I advise on that has changed the most during my career. There was a time where non-competes were almost entirely unenforceable in Texas....the old ethos of "a man has to earn a livin'" was in play...except in circumstances where the employee's identity and the business itself were super intertwined (like a radio personality at a radio station). That pendulum shifted wildly. Non-competes are INHERENTLY restraints of trade, so state legislatures had to carve out statutory exceptions. Texas was very late to the game in allowing for enforceable non-competes...but that pendulum has shifted big time now. Buc-ees has their employees under non-competes for goodness sake. I've seen companies try to enforce them on SECRETARIES!!! Typically in Texas, the consideration given by the company in exchange for the noncompete is the provision of confidential information. "We have all this confidential information and you will need it to do this job...but we're not gonna agree to give it to you unless you agree you can't work for a competitor in this geographic area...or call on the same customers you called on while you worked for us...for 2 years." That sounds good in theory but in a ton of instances, the information provided by the company is nowhere near confidential. Your customer list is secret.....then why do you list your customers on your website? Your list of contacts at Exxon who are involved in buying widgets from us is confidential.....but I can call Exxon and ask who I can speak to about the purchase of widgets. States that were once wayyyy more likely to enforce non-competes than Texas have been trying to put the genie back in the bottle for quite some time now. It's my understanding SOME states have banned them....I know for a fact that a lot more have just made them enforceable only in very narrow circumstances. I'm not sure where this will land. I think the question is going to be whether this administrative arm can do this or if it needed to be Congress....but my understanding is there's bipartisan activity towards either banning or limiting the enforceability of noncompetes anyway....my personal opinion is that we just went way too far in who they're enforced against, and went way too lax on what consideration needed to be provided (ACTUALLY PROVIDED) in order for them to be enforceable. Again, non-competes are INHERENTLY restraints of trade which seek to limit the right of individuals and entities to contract with one another. That's the starting place. We'll see where this lands...I have no idea, but there is definitely momentum around the country to try to pull back how far they've been expanded.
just got an email from a friend who is board certified in employment law who says he thinks the legal challenges for this will prevail...which would leave any changes to Congress ultimately. having said that, he has a very vested interest in not having that area of law change that much, and I imagine he's fairly concerned about what that would mean for his practice.
I know this will be sorted out slowly. Nobody knows what it means yet. And battles are still to come. BUT. Theoretically. If you already sold a company & signed an industry non-compete - you'd be free? Or are they gonna loophole you back in under that key executive terminology.
That's what I was going to say. Surely it'll be contested in court, but I'm in favor of it being struck down.
This isn’t about people who have non-competes connected to the sale of a business. I help people sell companies a lot in my work, BUT THIS IS NOT LEGAL ADVICE!!!!! Those non-competes will survive this, even if it’s upheld
This seems like one of those things that could repercussions that haven’t been thought all the way through.
