(Last Updated On: January 18, 2023)
If you’re wondering how the FTC’s recently proposed ban on non-compete clauses will impact Massachusetts employment law, you’re in the right place. Here’s what you should know about non-compete clauses, the FTC’s proposed ban, and what that means for you as an employer or employee.
What is a Non-Competition Clause?
If you’re not sure what a non-competition (or non-compete) clause is, no worries. The FTC defines it as a contractual term between an employer and an employee that prevents the worker from working for a competing employer, or starting a competing business, within a certain time period after the worker has terminated their employment with that company. The clause usually specifies a certain geographic area, as well, as a further restriction by which the employee must abide.
What is the FTC Proposing?
The FTC kicked off the new year by releasing a Notice of Proposed Rulemaking (NPRM) on January 5, 2023. In this notice, the FTC proposed banning employers from imposing non-compete clauses on their workers. The purpose of the ban is to give employees more freedom and economic liberty to pursue the types of jobs that are best for them and give them an outlet for their talent and creativity. The FTC also believes that doing away with non-competes will encourage competition, so companies have more incentive to treat employees well if they want to retain staff and discourage them from seeking employment elsewhere.
What’s the Next Step in the Legislative Process?
Currently, the NPRM is still in the proposal stage. Stakeholders have 60 days from its publication date in the Federal register to comment on the proposed ban.
It’s worth noting that some states, including California, North Dakota, Oklahoma, Illinois, Maryland, and Virginia already prohibit non-competes with a few narrow exceptions. Additionally, there’s a big push from the Biden Administration for the FTC to sign the ban into law, to protect employees nationwide and give them more freedom when it comes to where and how they work.
What Does This Mean for MA Employers and Employees?
If you’re an employer or association doing business within Massachusetts, you have the right to comment during the notice and comment period of the proposed ban. There are already laws in Massachusetts dictating what constitutes an enforceable non-compete. Non-competition clauses effective after October 2018 most comply with stringent requirements. Employers may argue that these requirements already limit their ability to protect their business.
It’s vital that you’re prepared for the ban’s finalization if it is approved. We strongly recommend that you review any current policies, procedures, and agreements that would be impacted by the ban. Then start developing policies and agreements that protect your company’s interests, trade secrets, and confidential information without the need for non-competes with your staff.
If you’re an employee in Massachusetts, it’s important to stay up to date on the latest news with the proposed ban. When and if the ban is finalized, you should receive paper or digital communication from your employer that the company’s current non-compete clauses is no longer in effect. Though, if the ban doesn’t move past the consideration phase, be aware that any non-compete agreements that you’ve signed with your current employer may be enforceable.
Need Help Drafting or Reviewing a Non-Compete Clause?
Want some guidance as you create a non-compete clause for your company or drafting policies in preparation for the potential ban? Need a pro to help you review a non-compete clause from your current or prospective employer before you sign it? The attorneys at Rodman Employment Law are here for you! We know all the ins and outs of non-compete clauses and will be happy to share our expertise. Contact us at 617-820-5250.