Understanding the FTC’s Landmark Ban on Noncompetes

The FTC issued its final rule broadly banning noncompete clauses between employers and workers. In this episode of “Fierce Competition,” Skadden attorneys Tara Reinhart, Annie Villanueva Jeffers and Justine Haimi discuss the contents of this bombshell rule, the mounting legal challenges it faces and what clients should do now that the rule has been finalized.
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In this episode of the "Fierce Competition" podcast, Skadden attorneys Tara Reinhart (partner, Washington, D.C.), Annie Villanueva Jeffers (partner, New York and Palo Alto) and Justine Haimi (counsel, New York) explore the Federal Trade Commission's (FTC’s) landmark ban on noncompete agreements. They discuss the FTC's rationale for the rule, as well as potential implications of the ban for businesses and enforcement challenges it may face. Tara, Annie and Justine point out the likelihood of a preliminary injunction against the rule due to ongoing litigation, and they highlight strategies for employers to navigate this new landscape. The episode emphasizes the FTC's increased focus on labor and worker protection, underscoring the need for companies to monitor the situation given its potential widespread impact on antitrust enforcement and employment practices.
Key Points
FTC's Broad Ban on Noncompetes: Intending to address concerns such as wage suppression, worker exploitation and hindered innovation, the Federal Trade Commission (FTC) has introduced a controversial rule banning noncompete agreements. Exceptions to this rule include situations involving the sale of a business and existing agreements with senior executives.
Anticipated Challenges to the Rule: In addition to potential enforcement issues, other challenges may stem from the states' traditional role in regulating noncompetes and implications for businesses protecting their interests. Ongoing litigation from the U.S. Chamber of Commerce, among other entities, could lead to a preliminary injunction against this rule.
Navigating the New Landscape for Employers: Employers may want to consider alternative strategies to protect their interests in this new paradigm, including the use of non-solicitation agreements, garden leave arrangements and agreements to protect trade secrets and other confidential information. Regular monitoring of the situation is suggested due to the rule’s far-reaching effects on antitrust enforcement and employment practices.