The Federal Trade Commission's (FTC) new proposed rule that would prohibit many employers nationwide – including trade and professional associations but not including charities and other non-profits – from entering into any non-compete agreements with all workers (including independent contractors and not excluding senior executives) has gotten the attention of the association community.
What the final rule will look like and whether it will be challenged in court and survive such challenges is unclear. Meanwhile, at the state level, approximately 15 states and D.C. have enacted laws that impose some form of limitation on the use of employee non-compete agreements. In D.C., a new law took effect last October that significantly restricts employers' use of non-compete agreements, but in a much-scaled-back version compared to the original law. On the other side of the country, California has for many years had the nation's most sweeping statutory ban against employee non-compete agreements. Overlayed on top of all of this is every state's and D.C.'s "common law," which has always permitted but imposed limitations and conditions on employers' use of non-compete agreements, with the limitations and conditions varying from state to state.
Common Law on Non-compete Agreements
Common law in the United States treats non-compete agreements as generally enforceable, but subject to certain limitations and requirements. Non-compete agreements are generally defined as contractual agreements between employers and employees that restrict employees from competing with their former employers for a certain period of time and within a certain geographic area after the termination of employment.
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