The FTC's Non-compete Ban: What To Know And How To Respond

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Dawn Mertineit, partner in Seyfarth's Trade Secrets, Non-Competes & Data Privacy practice, authored an article titled, "The FTC's non-compete ban: What to know and how to respond" ...
United States Intellectual Property
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Dawn Mertineit, partner in Seyfarth's Trade Secrets, Non-Competes & Data Privacy practice, authored an article titled, "The FTC's non-compete ban: What to know and how to respond" on International Employment Lawyer.

Another notable limitation is contained in the final rule's definition of a non-compete. Non-competes do not include clauses that only prohibit a worker from accepting work or operating a business outside the United States. In landing on this definition, the FTC considered various public comments expressing concerns about a final rule that would have an extraterritorial impact. Among those concerns were comments highlighting (1) the potential exacerbation of a shortage of science and technology workers if employers in other countries could more easily poach American workers; (2) other countries' relatively weaker protections for trade secrets; (3) the greater challenge in litigating trade secret misappropriation claims in some other jurisdictions; and (4) the potential conflict between the rule and certain other statutes or multilateral agreements, such as the Protecting American Intellectual Property Act of 2022 or the World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS").

While the FTC did not find all the aforementioned concerns to be validated, it nonetheless chose to limit the rule's application to work performed in the United States. Thus, the final rule (if it goes into effect—more on that below) expressly limits the definition of a non-compete to agreements "that prevent workers from seeking or accepting work in the U.S. or operating a business in the U.S." In other words, even for workers who do not meet the definition of a "senior executive" or are not otherwise covered by an exception to the rule, an employer can impose a non-compete if it only prevents the worker from accepting a role or operating a business abroad (subject to jurisdictional-specific statutory requirements and common law governing the scope of restrictive covenants, of course). That said, the rule seemingly would still apply to foreign workers to the extent it prevents them from working or operating a business in the United States.

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