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Labor, Employment and Immigration Update

FTC Proposes Rule to Ban Noncompete Clauses Between Employers and Workers

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Yesterday, the U.S. Federal Trade Commission (FTC) published a proposed rule that would significantly change the federal law by prohibiting employers from imposing non-compete clauses on workers, including independent contractors. The proposed rule also requires employers to rescind existing non-compete clauses with workers and actively inform workers that any such clauses are no longer in effect. There is a limited exception in the proposed rule for non-compete clauses between the seller and buyer of a business, but then only for substantial owners, which the proposed rule defines as those who own at least 25% of the entity being sold — an exception more narrow even than California’s restrictive rule. If adopted, the proposed rule would supersede any state or local law or regulation governing non-compete clauses.

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