FTC’s Proposed Rule on Non-Compete Clauses: What Illinois Employees Need to Know

The Federal Trade Commission (FTC) recently proposed a new rule that could significantly impact the enforceability of non-compete clauses in employment agreements. This development could have far-reaching consequences for both employers and employees in Illinois and across the nation. In this blog post, we will provide an overview of the proposed rule and discuss its potential implications for employees in Illinois.

The FTC’s proposed rule aims to declare non-compete clauses as an unfair method of competition, thereby preventing employers from entering into new non-compete agreements with workers and requiring employers to rescind existing non-compete clauses. The FTC estimates that this rule could increase American workers’ earnings between $250 billion and $296 billion per year.

Under the proposed rule, a non-compete clause is defined as a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person or operating a business after the worker’s employment with the employer has ended. The rule also introduces a “functional test” for determining whether a contractual term is a de facto non-compete clause, which includes overly broad non-disclosure agreements and certain training cost reimbursement requirements.

If the FTC’s proposed rule is finalized, it would have significant implications for employees in Illinois, particularly those subject to non-compete clauses in their employment agreements.

  • Greater freedom to pursue better employment opportunities: With the proposed rule rendering non-compete clauses unenforceable, employees would have increased freedom to seek and accept employment with competing employers or start competing businesses without fear of legal repercussions.
  • Potential increase in wages: The elimination of non-compete clauses could lead to greater competition for skilled workers, potentially driving up wages for both workers who were previously subject to non-compete clauses and those who were not.
  • Enhanced protection under Illinois law: The proposed rule includes a provision that allows for state laws providing greater protection to workers than the federal rule to remain in effect. Illinois employees could potentially benefit from both the federal rule and any additional state-level protections.
  • Rescission and notice requirements for existing non-compete clauses: Employers would be required to rescind existing non-compete clauses and provide notice to workers that the clauses are no longer in effect, offering relief to employees currently bound by such clauses.

The FTC’s proposed rule on non-compete clauses has the potential to significantly alter the landscape of employment agreements in Illinois and across the nation. While the rule is still in the proposal stage and subject to change, employees should be aware of the potential impact on their current and future employment contracts.

If you have concerns about the enforceability of a non-compete clause in your employment agreement or need assistance in understanding your rights under Illinois law, consider consulting with an attorney at Lubin Austermuehle. Our firm represents both employees and employers throughout the Chicagoland area, from Waukegan to Wheaton to Evanston and beyond, with issues related to covenants not to compete and other employment-related agreements. We are always available to consult with you to discuss your legal issues and our ability to meet (and exceed) your expectations. Call 630-333-0333 or contact us via our website by clicking here.

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