Small firm attention, big firm results

  1. Home
  2.  | 
  3. Business Litigation
  4.  | FTC reviewing non-compete clauses

FTC reviewing non-compete clauses

On Behalf of | Feb 2, 2022 | Business Litigation

In July 2021, President Biden aimed to promote competition in the U.S. economy with an Executive Order. Part of the broad order includes the Federal Trade Commission curtailing the use of non-compete clauses and other agreements. The FTC is trying to stop agreements that unfairly limit worker mobility in Tennessee and beyond.

Delay in action on non-compete clauses

The FTC started taking action in 2022 by having informal proceedings about the issues. The FTC’s slow response is probably due to the agency’s vacancies. The FTC usually has five members, but there are currently two Democrats and two Republicans. The current administration nominated another Democrat for membership but is still pending, and the agency is still creating the groundwork.

In early 2022, the FTC and Department of Justice had two days of informal fact-gathering, workshops and panels. The fact-finding conferences talked about post-employment obligations and non-compete clauses. The event serves as the foundation of the formal proceedings. The proceedings can lead to stricter non-compete clauses and other agreements, which will affect business litigation.

Congress looks at restrictive covenants

While the FTC and DoJ have fact-finding events, Congress has been looking at restrictive covenants. Congress’ new Freedom to Compete Act is under committee review. The bi-partisan bill allows narrowing the use of non-compete clauses in employment contracts. The act will void all current non-compete clauses. The act broadly describes a non-compete agreement as restricting an employee from seeking employment for a certain time, in a certain area or for a competitor.

Issues with relaxing non-compete clauses

There could be legislative or executive federal action on the subject by the end of 2022. However, there are serious concerns about employees taking trade secrets after termination. That’s the fear that creates these types of agreements in the first place. If an employee can change jobs without restrictions, then the employee might sell the trade secrets to a competitor. Without non-compete clauses, employers need to include language to protect their intellectual properties.