FTC proposes banning noncompete agreements, but not all agree

FTC proposes banning noncompete agreements, but not all agree

On Behalf of | Jan 13, 2023 | Employment Law - Employee

It is common for employers in Florida to require employees to sign a noncompete agreement either while employed or upon leaving the company. Recently, the U.S. Federal Trade Commission (FTC) has proposed a rule that could change this practice.

The FTC’s proposal

The FTC has proposed a change to noncompete rules under federal antitrust regulations. The proposal would ban employers from requiring most types of workers to sign noncompete agreements. Current noncompete agreements would be made invalid.

The FTC stated that employers use noncompete agreements to keep workers from freely leaving their employment to obtain a higher-paying position or a position with more favorable working conditions.

If the rule becomes effective, the FTC estimates that wages in the United States will increase by a combined $300 billion annually, giving around 30 million workers the chance to pursue a higher-quality job elsewhere.

Opposition to the proposal

Not all are on board with these changes. Specifically, the U.S. Chamber of Commerce has opposed the proposal stating it constitutes overreach by the FTC and that state law should continue to regulate the use of noncompete agreements. The U.S. Chamber of Commerce is contemplating pursuing a lawsuit against the FTC.

The current state of noncompete agreements

Currently, noncompete agreements are still enforceable in many states. They can prohibit employees from seeking jobs with competing companies within a specific geographic scope and for a specific amount of time.

Noncompete agreements are meant to protect an employer’s interest in preserving trade secrets, protecting business operations and retaining the value of training workers to perform specific jobs.

However, noncompete agreements are only enforceable if they protect a legitimate business interest, the time limitations are reasonable and the geographic scope is specific. Noncompete agreements cannot be so overbroad as to make it unduly difficult for an employee to earn a living elsewhere.

So, for the time being noncompete agreements are enforceable in most states, including Florida. The FTC’s proposal could change this, but that remains to be seen.