FTC proposes ban on noncompete clauses

The Federal Trade Commission today proposed a new rule to ban the use of noncompete clauses in employee contracts. The FTC does not have regulatory authority over banks, but it does have authority over bank affiliates.

The proposed rule would make it illegal for an employer to enter into a noncompete contract with a worker, maintain a noncompete contract with a worker, or tell a worker—under certain circumstances—that the worker is subject to a noncompete agreement. It would apply to independent contractors and anyone who works for an employer, whether paid or unpaid, the agency said. It would also require employers to rescind existing noncompete agreements and actively inform workers that they are no longer in effect, and includes an exception for such clauses between the seller and buyer of a business.

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