The Center highlighted that the broad body of existing state law stipulates non-compete agreements must be reasonable in scope and duration to be enforceable. However, if the FTC were to consider rules on non-compete agreements, the Center encouraged the FTC to draw a clear distinction between the use of such agreements at the senior level and for specific employee classes with access to sensitive technical knowledge or customer/account information. While the administration may have concerns about the power dynamics in employment negotiations for entry-level or hourly employees, the Center clarified that those power dynamics are minimal to non-existent for executives (who may hire specialized counsel to assist in employment agreement negotiations).
The Center’s comments highlighted that Subscriber companies believe non-compete clauses, when used responsibly, can help companies protect vital investments in their employees while ensuring the security of research and development, trade secrets, and institutional knowledge.
Given that President Biden specifically requested restrictions on non-compete provisions, it is likely that the FTC will propose a rule that limits their use. It is not clear when such a proposed rule would be published but the comment period on the subject closed on September 30th, so it could arrive later this year.
