![]() ![]() If an employee with a fixed-term employment agreement leaves for a competitor before the contract term ends, the former employer can sue the departing employee for damages arising from the contract breach but cannot bar them from taking the new job. This is consistent with California law, where employment contracts for fixed durations are permitted, even though post-employment non-competes are not. In supplementary information regarding the proposed rule, the FTC clarifies that the non-compete ban does not apply to contracts of employment with a fixed duration and specifically states that they are permissible (NPRM, 88 Fed. The proposed non-compete ban similarly does not per se prohibit confidentiality agreements, unless they are so broad that they functionally prevent a worker from working in the same field for another employer or in business for themselves. It does not per se prohibit other restrictive covenants, such as customer or employee non-solicits, unless they are so broad that they function as a “de facto non-compete.” The non-compete ban is limited to traditional “pure” non-competes. Restrictive covenants other than “pure” non-competes.The proposed rule prohibits employers from entering into, enforcing, or attempting to enforce post-employment non-compete agreements with workers. What are the key provisions of the proposed rule? The FTC has received thousands of comments and most experts anticipate that the proposed rule will be challenged on multiple grounds. The NPRM was published in the Federal Register on Januand is subject to a public comment period before it becomes final (Non-Compete Clause Rule (NPRM), 88 Fed. ![]() The proposed rule broadly prohibits traditional post-employment non-competes and, if finalized and becomes effective, would be a sea change for employers that routinely use non-competes to protect their valuable assets, including trade secrets and goodwill. ![]() The FTC’s proposal would create a new subchapter J, Part 910 of the rules promulgated under Section 5 of the Federal Trade Commission Act premised on the assumption that it “is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker” and therefore falls within the FTC’s domain. On January 5, 2023, the FTC announced and released a notice of proposed rulemaking (NPRM) to prohibit employers from entering into, enforcing, or attempting to enforce non-compete clauses with workers, including independent contractors. ![]()
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