Over the years the courts have been limiting, if not outright striking, non-compete agreements which prohibit employees from working in their chosen profession for a period of time or in a geographic area.

Those agreements can be extremely harmful to the employee, and limit competition in the markets. The reality is that employers have an interest in protecting their intellectual property, but that protection can be provided by a carefully drafted confidentiality agreement and non-solicitation agreement, protecting trade secrets and other proprietary information. Banning an employee from working in his or her chosen profession is not necessary.

The FTC has taken up the issue, proposing a ban on non-compete agreements.

The Federal Trade Commission proposed a new rule that would ban employers from imposing noncompetes on their workers, a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses. By stopping this practice, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.

The FTC is seeking public comment on the proposed rule, which is based on a preliminary finding that noncompetes constitute an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act.

The FTC press release is online. Forbes’ commentary on the proposed rule is also worth reading.

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