Understanding the FTC’s ban on noncompetes

On April 23, the Federal Trade Commission issued its long-awaited rule on noncompete agreements, announcing that they will no longer be allowed in businesses of any type.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

Almost immediately, the U.S. Chamber of Commerce announced it would sue to block the rule. “The Federal Trade Commission’s decision to ban employer noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive,” Chamber President Suzanne P. Clark, said in a statement. A court will ultimately decide.

For businesses, though, there are decisions to make. Do they continue to use them pending the outcome of the Chamber’s efforts? Do they immediately stop using them?

Stefan Meisner, a partner in the law firm Crowell and Moring, joined the Talking Supply Chain podcast to discuss the FTC’s decision and the impacts it will have on businesses. Please click here to listen to his conversation with Supply Chain Management Review Editor Brian Straight.