On January 5, 2023, the Federal Trade Commission announced that it would be publishing a proposed rule that would ban employers from entering into noncompetition agreements with employees nationwide, including rescinding existing noncompetition agreements.

The scope of the FTC’s proposed rule would likely preempt the noncompetition provisions of the Illinois Freedom to Work Act which currently governs noncompetition agreements in Illinois. This means Illinois employers who have noncompetition agreements which currently comply with the Illinois Freedom to Work Act might not be compliant with the proposed FTC rule, including the possibility that noncompetition agreements will be unenforceable nationwide and must be rescinded.

The proposed rule will likely receive significant comments before it becomes final and effective, and may also be challenged in court.

Thomas Mamer LLP will be closely monitoring the proposed rule, its possible implementation, and any challenges to the rule.

Employers should begin considering the impact this FTC proposed rule may have on their noncompetition agreements, and also how they may wish to amend their employment agreements, including noncompetition, nonsolicitation, nondisclosure, and trade secret agreements.

Contact Philip Pence and Eric Chovanec with any questions.