Labor & Employment Blog

In January of 2023, the Federal Trade Commission issued a notice of proposed rulemaking that planned to ban non-compete clauses for workers, as the majority of the Commissioners contended that non-compete clauses are unfair methods of competition. The FTC received more than 26,000 public comments to the proposed rule.

Today, in a 3-2 vote by the FTC’s Commissioners, the FTC authorized publication of the Non-Compete Clause Rule. The FTC’s fact sheet pertaining to the rule and the rule itself can be found here.

The final rule bans new non-competes with all workers after the effective date. The final rule contains a small carve-out for existing non-competes with senior executives. But the FTC estimates less than 1% of workers qualify as a senior executive—someone who earned more than $151,164 annually and who was in a “policy-making position.” The new rule does not apply to non-compete clauses entered into as part of a sale of a business entity.

Prior to the vote, each Commissioner reacted to the proposed rule. Those in favor of the rule referred to anticipated benefits from the ban, including a reduction in spending on physician services, new business creation, and increased wages for workers. Those opposing the rule emphasized their belief that the FTC lacks the necessary rulemaking authority to issue the rule.

Subject to court intervention, the proposed rule's effective date will be 120 days after the rule is published in the Federal Register. We will continue to monitor the legal landscape surrounding the new rule and the expected legal challenges to it.

Chamberlain Hrdlicka’s Labor & Employment Group is available to answer any questions and provide counsel on whether workers are properly classified as independent contractors under the Final Rule. Feel free to forward the Labor & Employment Alerts to others who might be interested. If you have questions, please send an e-mail to employmentlaw@chamberlainlaw.com or call us.