FTC Proposes New Rule to Ban Non-Compete Contracts Nationwide

Extensive litigation awaits the Commission if rule is finalized

By:  David Bland

“Since the agency’s creation over 100 years ago, Congress has never delegated the FTC anything close to the authority it would need to promulgate such a competition rule. The Chamber is confident that this unlawful action will not stand.” —Sean Heather, SVP for International Regulatory Affairs and Antitrust, U.S. Chamber of Commerce

On Jan. 5 the Federal Trade Commission (FTC) proposed a new rule that would ban all non-compete contracts. The major move by the Commission comes on the heels of President Biden’s July 2021 Executive Order on Promoting Competition in the American Economy, in which Biden directed the FTC to utilize its rulemaking authority to “curtail the unfair use of non-compete clauses…that may unfairly limit worker mobility,” among other requests. The order did not change any existing laws but set into motion the FTC’s move to consider non-compete clauses as “unfair methods of competition” under Section 5 of the FTC Act.

The proposed rule begins a 60-day public comment period that ends on March 20. Nearly 5,000 comments had been submitted at the time of this publishing with most of the comments strongly supporting the FTC’s new rule.