FTC proposes regulation outlawing noncompete agreements for workers

On January 5, 2023, the Federal Trade Commission (FTC) issued a notice of proposed rulemaking (NPRM) that if enacted would outlaw noncompete agreements for virtually all workers. The step is surprising. The FTC has traditionally focused on regulating consumer issues rather than the workplace, and for that reason, the draft regulation will likely be subject to numerous legal challenges. But if made into law, it will change hiring practices in all but a handful of states where such agreements are already illegal.

What the proposal would do
The NPRM would explicitly prohibit employers from requiring workers to sign contracts with noncompete clauses, defined as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”