FTC outlaws noncompete agreements


The Federal Trade Commission (“FTC”), as it had signaled, recently banned noncompete agreements for most U.S. workers, which will affect an estimated thirty million employees. The new rule of the FTC prohibits employers from including noncompetes in employment contracts and requires those with active agreements to inform workers that they are void. It also attempts to nullify existing noncompete agreements, except for those involving “senior executives.” The new rule is set to take effect after 120 days.

Swiftly after the rule was enacted, the U.S Chamber of Commerce, along with other business groups, sued the FTC in a Texas federal court, seeking to block the new rule. Their position is that the FTC lacks authority to issue rules that define unfair methods of competition.