FTC’s Proposed Ban on Noncompete Clauses May Have Far-Reaching Implications for Executive Compensation
Morgan Lewis – The Federal Trade Commission (FTC) announced a notice of proposed rulemaking on January 5, 2023, that would ban employers from entering into or maintaining noncompete clauses with their workers. The proposal was issued in response to President Joseph Biden’s July 9, 2021 executive order and related statements calling on the FTC to ban or limit employment contract restrictive covenants that restrict workers’ freedom to change jobs. While President Biden’s earlier comments surrounding the 2021 executive order appeared to be focused on lower-level employees, the newly proposed rule defines “worker” in an expansive manner. Accordingly, the proposal could have far-reaching impacts on the agreements companies enter into with their C-suite and other key executives.