Trade Secrets & Employee Mobility

[Update: On April 23, 2024, the Federal Trade Commission voted 3-2 to issue its final noncompete rule, with only a few changes from the proposed rule. Analysis of the final rule, the changes, and what may come next are discussed in this blog post.]

On April 16, 2024, the FTC announced that it will hold a special Open Commission Meeting on April 23, 2024 to vote on its proposed rule to ban the use of non-compete clauses in employment contracts, which has been pending since January 2023.  

As we reported then, the proposed rule, as drafted, would prohibit employers throughout the United States ...

According to Bloomberg, The Federal Trade Commission (“FTC”) is not expected to vote on the final version of a new rule that would ban noncompete clauses in employment contracts until April 2024. The rule defines a “non-compete clause” as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”

As we previously reported, the proposed rule would ban employers from imposing noncompete agreements on their employees. The rule would also require employers to rescind all preexisting noncompete agreements and to notify all employees who had been subject to a noncompete agreement of the recission. Although the proposed rule would not prohibit other kinds of employment restrictions, such as nondisclosure agreements, certain restrictions that are overbroad could be subject to the new rule. For example, a non-disclosure agreement between an employer and an employee that is written so broadly that it effectively precludes the employee from working in the same field would be considered a “de facto” noncompete clause.