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Guerra & Partners


FTC Proposes Nationwide Ban On Non-compete Clauses

The Federal Trade Commission started the new year with a shock wave on January 5th by proposing a nationwide ban on non-competition clauses in employment contracts.  The FTC made a preliminary finding that such clauses constitute an unfair method of competition that suppresses wages, reduces worker mobility, and hinders innovation.  The rule follows a 2021 executive order that President Biden endorsed as promoting competition.  Employers have long used non-competes to protect against the loss of business to former employees who leave to start competing enterprises.  The FTC drafted its proposed rule broadly.  It would limit the use of non-disclosure agreements and training reimbursement agreements that might have the same functional effect as a non-compete.  The proposed rule has a narrow exception for the sale of a business when the restricted party has at least a 25% ownership interest.  The FTC rule would trump state law regulation of non-competes, including Florida’s non-compete statute, which imposes geographic and temporal limits on these agreements.  Florida courts and arbitrators regularly interpret and apply Florida non-compete law in employment cases.  The FTC is accepting comments on the proposed rule through March 10, 2023.  Guerra & Partners will continue to follow the progress of this proposed rule closely. We regularly advise clients on non-compete and other restrictive covenants and have experience litigating them.  If you have a question about the proposed rule and its possible effect on your business, don’t hesitate to reach out.