HR Policy Association hosted a webinar providing an in-depth look at the FTC’s rule, what it means for large employers, and important next steps.
The webinar featured Ani Huang, Senior Executive Vice President, Chief Content Officer, HR Policy Association, and President and CEO, Center on Executive Compensation; Gregory Hoff, Assistant General Counsel, Director of Labor & Employment Law and Policy; and Jason C. Schwartz, Partner, Gibson, Dunn & Crutcher LLP.
Broad ban goes beyond typical non-compete agreements: The panelists discussed the sweeping scope of the FTC’s rule, noting that its broad definition of “non-compete agreement” could also prohibit many forfeiture agreements and even some nondisclosure or non-solicitation agreements. Mr. Schwartz noted that there is still much uncertainty regarding where exactly the lines of the rule will be drawn in relation to other restrictive covenants.
Business as usual for large companies: Ms. Huang discussed early results of an HRPA members survey regarding the FTC’s rule. An overwhelming number of respondents indicated that they will continue to issue new non-compete agreements until the rule’s effective date as well as keep existing agreements with senior executives as allowed by the rule. The full results of the survey will be shared with membership next week.
Even the Washington Post opposes FTC rule: A Washington Post editorial this week opposed the FTC’s rule, saying it “sweeps too broadly” and suggesting that a federal legislative ban for workers making under $100,000 is more appropriate.
Alternatives needed: Ms. Huang and Mr. Schwartz discussed potential alternatives to non-compete agreements for protecting investments, including increased compensation or long-term equity, non-disclosure agreements, garden leave arrangements, and employment agreements. Mr. Schwartz noted the strong societal push against noncompete agreements. He emphasized the importance – even if the FTC’s rule is struck down in court – of both limiting usage of non-compete agreements to where absolutely necessary and better articulating to policymakers the business case for such usage.
Will the rule ever go into effect? Mr. Schwartz and Mr. Hoff discussed the ongoing lawsuits against the rule and their potential for overturning it. Mr. Schwartz suggested that the rule is more likely than not to be at least temporarily blocked, although he indicated that such a result is unlikely before July. Regardless, Mr. Schwartz strongly emphasized that employers should prepare for compliance, including by auditing company use of non-compete agreements and preparing to provide notice to all individuals currently under such agreements pursuant to the requirements of the rule.
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