The FTC has published a proposed rule prohibiting the use of non-compete agreements nationwide, except in connection with the sale of a business. Overly broad non-disclosure clauses are recognized under the rule as constructive non-compete agreements if the effect is to render workers unemployable in their specialty occupation.
DOL regulations currently allow for the use and enforcement of non-compete agreements with H-1B sponsored employees — but only to the extent permitted under governing state and local law. Unlawful use constitutes an LCA violation that could result in civil money penalties, wage liability, and debarment. If the FTC rule becomes effective, the use of non-compete agreements would be rendered unlawful in employment agreements with all workers – foreign and domestic.
The FTC proposed rule is subject to a 60-day comment period. Following publication as a final rule, employers will have 180 days to come into compliance. To avoid FTC fines and penalties, employers will be required to serve affected workers with a notice of rescission prior to the compliance date.
Now is the time to seek a review of existing employment contracts for compliance with current federal, state, and local laws — and to draft incentive/retention policies for the time when highly skilled employees will be loosed from existing non-compete agreements to seek other opportunities without the risk of litigation.