The Federal Trade Commission has extended the comment period on its proposed ban of noncompete clauses in employment contracts.
What’s going on: Comments on the FTC’s proposed change—which would prohibit employers from imposing noncompete agreements on employees, regardless of their involvement with company intellectual property—will now be accepted until April 19.
- The original deadline was March 20. The NAM had urged the agency to extend the comment period through May, owing to the rule’s far-reaching economic impact and legal implications.
The background: The FTC proposed the ban in January, saying noncompetes “prevent workers from leaving jobs and decrease competition for workers” while “prevent[ing] new businesses from forming [and] stifling entrepreneurship.”
- However, many manufacturers use noncompete clauses to ensure that their IP is protected when key workers leave and seek employment elsewhere.
- Under the proposed ban, small and medium-sized manufacturers are at risk of having their proprietary information and processes, along with other sensitive company information, passed to competitors.
- The ban would also force manufacturers to implement costly controls or silo different parts of their businesses, both of which would reduce efficiency.
What we’re doing: The NAM has opposed this ban from the start and continues to fight it, urging the FTC to table the proposal until the agency can put forward a more tailored and thoughtful regulation.