The Five Things CHROs Need to Know About the FTC’s Proposed Non-Compete Ban | HR Policy Association

Workforce Trends

Noncompete agreements—which restrict employees from competing with their employer during or after employment—are used in many organizations. These clauses are often designed to prevent an employee from working for a direct competitor, starting their own competing business, working in the same industry, or soliciting the employer’s customers or clients. I previously shared that, on January 5, 2023, the Federal Trade Commission (FTC) proposed a rule preventing employers from entering into noncompete clauses with workers and requiring employers to rescind existing noncompete clauses. The proposed rule would extend to all workers—whether paid or unpaid— and would require companies to rescind existing noncompete agreements within 180 days of publication of the final rule. This article covers five important considerations for CHROs and their teams as the rule’s timeline progresses. Two considerations are: 1) The ban on noncompete agreements contains no exceptions for senior executives and other highly sensitive employees, 2) The proposed rules would preempt state laws that allow the use of noncompete agreements. While the public initially had 60 days to comment on the rule, the FTC has extended the public comment period to April 19, 2023. The proposed rule has various talent implications—from retention to recruitment—that organizations should consider and factor into their talent plans and strategy.