De Facto Noncompetes Could Vastly Widen FTC Rule’s Reach
To combat employment restrictions that hamper employee mobility and dampen wages, the Federal Trade Commission in early January proposed a nearly complete ban on noncompete agreements, which the agency says affect 1 in 5 U.S. workers.
"What does the FTC mean when it says 'unusually broad,'" said Kevin M. Passerini, a Blank Rome LLP labor and employment attorney critical of the FTC's examples of potential de facto noncompetes, examples he said indicate an overly broad reach.
According to Passerini, the "very vague standard" for de facto noncompetes could let the FTC go after a host of legitimate agreements, such as commitments to pay back or give up equity in an employer.
"They all create a disincentive to somebody leaving," and that hook might be enough for the FTC to ban otherwise reasonable employment provisions, Passerini said.
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"De Facto Noncompetes Could Vastly Widen FTC Rule’s Reach," by Bryan Koenig was published in Law360 on March 14, 2023.