Lehman Johnson Law, PLLC

02/09/2023

Happy Thursday!
My friend Zach Wolfe wrote a blog post on the FTC's proposal for a ban on non-competes. Read ahead for some great insights!

What if the rule just codifies existing non-compete law?

02/02/2023

In light of the FTC's proposal for a ban on non-competes, I've collected a few potential exceptions which merit attention. Please read my reflections below, and feel free to add your thoughts in the comments!

Note: This is only proposed at this point and will not become effective until AFTER issuance of the final rule.

Owners & Executives:
As explicitly stated in the proposal, owners still may be subject to a non-compete when they sell their ownership in a business. The proposal does not mention an exception that would continue to apply non-competes to executives, but, as the FTC has invited comment, this certainly could be brought into the discussion in the near future.

Non-Solicitation Clauses:
I believe it is likely that this ban will not impact the enforcement of non-solicitation clauses prohibiting former employees from soliciting customers or employees of their former employer.
Of course, there is room for debate in this area, as former employees may argue that those restrictions limit their ability to work successfully in the same way as a non-compete would.

Again, these are based on my own observations having read the proposal, and no final rule has been issued as of yet. If you have questions or comments, leave them below, so we can all engage in discussion!

Note: Any employer or employee dealing with noncompetes or other restrictions on competition should seek legal counsel.

01/26/2023

The FTC has proposed a ban on noncompete clauses.
Here's a breakdown of the 3 main points from the document:

Note: This is only proposed at this point and will not become effective until AFTER issuance of the final rule. Any employer or employee dealing with noncompetes or other restrictions on competition should seek legal counsel.

1. EMPLOYERS REQUIRED TO RESCIND EXISTING NONCOMPETES: In addition to prohibiting employers from entering into non-compete
clauses with workers starting on the rule’s compliance date, the proposed rule would require employers to rescind existing non-compete clauses no later than the rule’s compliance date. The proposed rule would also require an employer rescinding a non-compete clause to provide notice to the worker that the worker’s non-compete clause is no longer in effect. To facilitate compliance, the proposed rule would
(1) include model language that would satisfy this notice requirement and (2) establish a safe harbor whereby an employer would satisfy the rule’s requirement to rescind existing non-compete clauses where it provides the worker with a notice that complies with this notice requirement.

2. LIMITED EXCEPTION TO NONCOMPETE BAN WITH SALE OF A BUSINESS: The proposed rule would include a limited exception for non-compete clauses between the seller and buyer of a business. This exception would only be available where the party restricted by the non-compete clause is an owner, member, or partner holding at least a 25% ownership interest in a business entity. The proposed regulatory text would clarify that non-compete clauses covered by this exception would remain subject to federal antitrust law as well as all other applicable law.

3. COMMENT SOUGHT ON SENIOR EXECUTIVE NONCOMPETES: In this notice of proposed rulemaking (“NPRM”), the Commission describes and seeks comment on several alternatives to the proposed rule, including whether noncompete clauses between employers and senior executives should be subject to a different standard than non-compete clauses with other workers. The Commission also assesses the benefits and costs of the proposed rule, the impact of the proposed rule on small businesses, and compliance costs related to the proposed rule’s notice requirement.

Finally, it is important to note that the document states that it will not ban other restrictions such as contracts barring solicitation of customers or employees.

I have been considering potential exceptions to this ban, which I will share soon. Until then, let me know your thoughts on the new proposal!

NOTE: Any employer or employee dealing with noncompetes or other restrictions on competition should seek legal counsel.

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01/23/2023

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12/29/2022

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