The Federal Trade Commission (FTC) announced that it will extend the comment period through April 19, 2023 for its proposed rule banning non-compete agreements for employees and independent contractors. (See FTC Announcement).
On January 5, 2023 the FTC issues a proposed rule that prohibits employers from using non-compete clauses with employees and independent contractors. If adopted, the FTC rule would require employers to rescind any such clauses contained in agreements with their employees and independent contractors, and provide notice that such clauses are no longer in effect. It would also prohibit such clauses moving forward.
The proposed rule can be accessed here (See FTC Proposed Rule). The rule is expressly limited to restrictive covenants that prohibit employee mobility - accepting jobs with competitors. But the proposed rule would also reach non-solicitation and non-disclosure provisions to the extent such provisions are functionally equivalent to a non-compete clause. Importantly, the proposed rule would supersede any inconsistent state law, which would include Utah common and statutory law on non-compete agreements.
It is likely that the rule will have substantial changes, if enacted. And it is a certainty that the rule would be subject to numerous legal challenges, if it becomes effective. However, as noted above, the rule is still in comment period and will not take effect until 180 days after the final rule is published.
We will continue to monitor this issue for our clients. For now, however, it is important to contact your lawyer to have a plan in place should the rule pass, and to develop a strategy for the use of restrictive covenants. Employees and employers will need to see what, if any, provisions can still be enforced and how to adopt strategy in light of any new restriction. Stavros Law can guide you through this process.
For more information, please feel free to call Stavros Law at (801) 758-7604 or email us at admin@stavroslaw.com.
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