On January 5, 2023, the Federal Trade Commission released a Notice of Proposed Rulemaking to prohibit employers from using contractual terms with workers that prevent such workers from seeking or accepting employment from another employer or operating a business after the end of the worker’s employment with the employer. Commonly referred to as non-compete clauses or “non-competes,” these terms permit employers to sue a former worker for breach of contract if the worker begins employment at another employer or starts a business—usually in competition with the employer—within certain geographic areas and for certain periods of time. The proposed rule will affect most of the U.S., including California, where non-competes are already unenforceable but are permitted in the context of selling a business. The end of this U.S. Tech Law Update includes a state survey, which shows that the vast majority of states currently permit the use of non-competes.
