Preparation key for ‘tectonic change’ from FTC noncompete ban

Companies would be wise to prepare to comply with the Federal Trade Commission’s (FTC) rule to ban noncompete clauses, despite legal challenges that might delay or prevent it taking effect altogether.

The final rule, issued April 23, would ban most noncompete clauses in employee contracts by September. The clauses impede competition and violate Section 5 of the Federal Trade Commission Act, the FTC said.

An estimated 30 million U.S. employees across many sectors have been required to sign the clauses, which generally prohibit them from taking a job with another company based on region or industry for some amount of time after leaving employment. This restriction keeps talent out of the job pool and hampers innovation, said FTC Chair Lina Khan following a 3-2 vote on the rule along party lines.