Matt Miller on FTC proposal to ban noncompetes

Matt Miller on FTC proposal to ban noncompetes

Buffalo Business First interviewed labor and employment attorney, Matt Miller for an article on noncompetes published on January 18, 2023. The article titled “Does your company use noncompetes? An FTC proposal could change that.” was written by Katie Anderson.

This article discusses a proposed rule from the Federal Trade Commission banning noncompete clauses. The FTC announced the proposed rule on Jan. 5, which would take away the states’ power to regulate noncompete agreements

The rule states that employers can’t enter into any future noncompete agreements with workers, “which is broadly defined to include independent contractors, apprentices and volunteers,” Miller said.

The rule also states employers can’t maintain or enforce those agreements.

“It’s broad and ambiguous, but in effect it would mean that any noncompete agreements that are in effect at the time this rule become effective would have to be rescinded by the employers,” Miller said.

The rule comes after President Biden signed an executive order encouraging the FTC to ban noncompete clauses. Miller said that while the rule itself is vague, he believes it was intended to assist average American workers, not high-level executives with access to trade secrets.

“I think by and large that philosophy is directed at lower-level employees, not necessarily the C-suite people or executives that are earning tremendous salaries and have the ability to sit on the sidelines for reasonable noncompete period,” he said.

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The article continues by describing possible affects that this rule could have on businesses in Western New York and what the law is and isn’t intended to do.

The rule isn’t intended to restrict businesses from protecting “legitimate business interests,” like trade secrets, Miller said.

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Further on the article discusses ways that businesses in the area can prepare for this new rule.

Employers shouldn’t panic yet, Miller said, because the proposal has a long way to go before it becomes law. There will be a 60-day comment period on the proposal, which both Lema and Miller encouraged employers to participate.

“I suspect given how broad this is, that they are going to receive thousands upon thousands of comments,” Miller said.

Once the new rule is finalized, it will be published in the federal register, and it wouldn’t go into effect for 180 days after that. Both Miller and Lema suspect the rule is too broad and will face substantial legal challenges that will hold it up in federal court.

“If they want to be proactive, employers should take stock of what noncompetes they have in effect and who they cover, and they should evaluate whether there are categories of employees that they truly need to be bound by these noncompetes,” Miller said. “If they’re going to have somebody bound by a noncompete, make sure it’s very narrow and that there’s a specific business interest that they want to protect.”

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Read the entire article on the Buffalo Business First website here.