FTC Task Force on Noncompete Agreements
|
APPLIES TO All Employers |
EFFECTIVE February 26, 2025 |
QUESTIONS? Contact HR On-Call |
Quick Look
|
Discussion:
The Federal Trade Commission (FTC) announced that a new Joint Labor Task Force has been created to focus on identifying and prosecuting deceptive, unfair, and anticompetitive labor practices, with a specific focus on scrutinizing noncompete agreements. The Task Force will prioritize investigating agreements between employers that limit worker mobility, including no-poach and wage-fixing agreements, and review noncompete clauses that may impose unnecessary restrictions on former employees.
The newly established Joint Labor Task Force is tasked with several key responsibilities, including prioritizing investigations into deceptive or anticompetitive labor practices. The team will work across various bureaus within the FTC to uncover and prosecute potentially harmful behaviors. One of the key focuses of the Task Force will be agreements between employers, such as no-poach agreements that prevent companies from hiring each other’s employees, or agreements to fix wages. These types of agreements are expected to be seen as automatic violations. Noncompete agreements are also a primary concern for the Task Force, though they will be assessed on a case-by-case basis, focusing on whether the restrictions are unnecessarily burdensome on employees.
The FTC’s renewed focus on noncompete agreements comes despite the fact that its attempt to ban these agreements nationwide was blocked by federal courts last year. Instead, the Task Force will focus on investigating specific noncompete agreements that it believes unfairly hinder worker mobility. Unlike other agreements such as no-poach or wage-fixing arrangements, noncompete clauses are not automatically deemed illegal, but the FTC will closely examine the scope of restrictions, including the duration and geographic scope, and the specific nature of the employee involved. The Task Force will investigate whether these agreements are being used in ways that impede workers from moving freely between jobs in their respective industries, as well as whether they are necessary and reasonable for the employer, especially in protecting sensitive business interests.
For employers, this means that they should carefully review their use of noncompete agreements to ensure compliance with these emerging standards. Noncompete clauses should be applied only when necessary to protect legitimate business interests, such as safeguarding confidential information or preventing unfair competition. Employers should consider whether less restrictive alternatives, such as confidentiality agreements or non-solicitation clauses, could be used instead of noncompete agreements.
Action Items
- Review noncompete agreements and other restrictive covenants with legal counsel.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase