In an interesting turn of events, the Federal Trade Commission (FTC) banned non-compete agreements by employers last week. The new rule prohibits companies from enforcing existing non-compete agreements on anyone other than senior executives, who the FTC defines as individuals earning “more than $151,164 annually who have policy making responsibilities at an organization.” The rule also prevents employers from implementing new non-compete contracts on senior executives in the future.
The FTC argues that non-compete agreements violate a 110-year-old law prohibiting unfair methods of competition. It also says that these agreements stunt the professional growth and income of U.S. employees – with 1 out of 5 employees subject to a non-compete. Sales staff, doctors, engineers, and salon employees are some of the most common workers affected by non-compete agreements, and the FTC estimates that its rule would “boost earnings by $400 billion or more over 10 years.”
Banning non-compete agreements is widely popular among employees, but business owners argue that they help protect intellectual property and trade secrets. The rule is slated to go into effect in four months, but the U.S. Chamber of Commerce is already planning a lawsuit with the argument that the FTC lacks the authority to ban such a rule. Others have expressed concern that organizations exempt from FTC regulation would have an unfair advantage. For example, banks and credit unions would be able to remain using non-compete agreements but other financial institutions would not.
Pregent Law specializes in all matters of employment law. If you need a Massachusetts attorney to review your contract or have other employment-related concerns, I encourage you to contact me for a free consultation.
