The Federal Trade Commission has long been positioning itself to enact a new rule that bans noncompete clauses across the entire nation, helping to relevel the playing field for business competition in line with Section 5 of the FTC Act. Sadly, the delays and lack of decision have left many states feeling disheartened and frustrated, with many believing that the new rule may be watered down before it arrives. Take a look below to find out more about what’s happened to date and find out when we can expect to see further action.
What Does the FTC Proposed Rule Cover?
The main aim of the proposed FTC ban on noncompete agreements is to stop harm being done to workers and business competitors. The FTC says that the current system not only blocks new businesses from being formed but that it also exploits workers, driving down their earnings by $300 billion every single year.
To make a change, the FTC started by seeking public opinion, but this process then led to extensions in the deadline for comments, delaying any new changes from being put into place. This move to extend left many people feeling frustrated, but the FTC explained that the additional 30-day deadline was given after huge public demand for more time. Since the deadline has passed, the FTC has been working through the responses and their decision and next steps are being eagerly anticipated.
How Are States Currently Handing the Noncompete Issue?
The issue of non-compete agreements is a source of serious debate across many US states, with some deciding to ban them already. New York is the latest state to act with legislators creating a stir by fast tracking a bill directly to Governor Kathy Hochul for approval. There are some that believe the bill is too broad to be passed and others that feel the New York contingent is taking the opportunity to use the momentum seen in other states while the FTC ruling is still pending. Either way, it seems likely that the non-compete debate will result in a ban in New York, with other states preparing to follow suit.
This decision to enact state bans on non-compete agreements underscores employee desire for a wider federal rule but also creates a sense of disparity across the country, giving those that use noncompete agreements a way to continue using them and adding to the inequality of competition that is stifling the potential for small businesses and employees to thrive.
When Can We Expect Action From the FTC?
When will the FTC issue a decision about the proposed rule? Unfortunately, there is still no official timescale known, but our sources indicate we may see action by Q1 of 2024 or potentially, by the end of 2023. Of course, any ruling by the FTC will likely be challenged on the basis of whether or not the FTC has governance authority with respect to non-competes.
When the decision is finally shared, there will be both opposition and support for it, and we look forward to seeing the scope of the final ruling. How is your company preparing for the ramifications of this pro