Regulatory and Legal Reform

The Federal Trade Commission will vote next week on the final version of a rule that would prohibit noncompete agreements between employers and their employees, Law360 (subscription) reports.

What’s going on: “According to the FTC’s announcement, the agency’s five commissioners will vote April 23 on whether to ‘authorize public disclosure of the proposed final rule,’ first unveiled in draft form in January 2023. Assuming a vote in the affirmative, staffers will give a presentation on the rule, followed by a second vote to issue the rule in its final form.”

• The agency did not indicate which, if any, changes it has made to the previous version of the rule.
• The FTC received more than 26,000 comments on the rule during the 90-day public comment period.

Why it’s important: A noncompete ban would cause disruption to the majority of manufacturing operations in the U.S., a 2023 NAM survey found.

• Some 70% of manufacturers in the U.S. use noncompete agreements, and they do so to safeguard intellectual property, sales information, industrial processes and business strategies.
• Approximately 66% of survey respondents—representing manufacturers of all sizes—said a ban would interfere with their operations.
• Around 50% of those polled said a ban would have a negative effect on their investment in employee training programs.

The NAM says: “The FTC’s proposed rule severely threatens manufacturers’ ability to protect intellectual property and responsibly invest in their employees,” said NAM Director of Transportation, Infrastructure and Labor Policy Max Hyman.

• “The NAM remains engaged on this critical issue for our members and will weigh our options in response to the commission’s vote next week.”