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Texas Lawyer – FTC Proposes Rule Banning Non-Compete Clauses with Workers

January 12, 2023

Larry Carbo, Kellen Scott, and AJ Foreman discuss the Federal Trade Commission’s proposed rule banning non-compete clauses with workers in Texas Lawyer article

Texas Lawyer

In a Texas Lawyer article, Chamberlain Hrdlicka’s Labor & Employment attorneys: Larry Carbo, Kellen Scott and AJ Foreman discuss the new rule banning non-compete clauses with workers proposed by the Federal Trade Commission in early January.

The rule would make it an unfair method of competition for an employer to maintain, enter into, or attempt to enter into a non-compete clause with a worker. Because the FTC has taken the position that a non-compete clause constitutes an unfair method of competition, the FTC has decided to outlaw non-compete clauses in most circumstances. The FTC is accepting public comments on its proposed rule until March 10, 2023.

“Under the proposed rule, employers would not only be barred from entering into (or attempting to enter into) non-compete agreements, but employers also would need to rescind any existing non-compete agreements they have in place,” said Carbo, Scott and Foreman. “In addition to rescinding all non-compete clauses, employers would have to notify current and former workers that their non-compete clauses are no longer in effect and may not be enforced against them.”

Furthermore, a final rule will supersede all inconsistent state laws and statutes. Most states enforce reasonable non-competition provisions, but a final rule supplants each state's current non-compete laws. The dissenting FTC Commissioner noted that the proposed rule would prohibit conduct that forty-seven state legislatures have allowed, including Georgia, Pennsylvania, and Texas.

To learn more, read the full article here. Chamberlain Hrdlicka is monitoring the status of the proposed rule and will provide another update when the FTC issues a final rule. If you have additional questions about the proposed rule, a non-compete clause, or other employment issues, we encourage you to reach out to your Chamberlain counsel.