David Woolf Provides Insight on the FTC’s Proposal to Ban Non-Compete Agreements

On January 5, the Federal Trade Commission (FTC) released a proposal to ban non-compete agreements that restrict mobility among employers. Several leading publications, including The American Business Journals, Law360, Modern Healthcare, SHRM, PLANADVISER, FundFire and Wealth Advisor turned to labor and employment partner David Woolf, a leader on employee mobility and restrictive covenant issues, for his insight on what the proposal means for employers.

Woolf stated that the FTC’s proposed rule was of “tremendous significance and goes farther than 47 states that have addressed the scope of non-competes.” He went on to say that “the commission sweeps up in its ban legitimate, pro-competitive restrictions, such as restrictions applicable to senior executives and tech workers, as well as other situations where the employee receives a tangible benefit for agreeing to the non-competition restriction.”

In speaking to Modern Healthcare, Woolf noted that “Non-compete clauses could give employers incentive to innovate and invest when they know what they are working on is protected and the employee isn’t going to walk out the door and go to a competitor.” He added that a narrower regulatory approach to non-compete agreements would be more appropriate than an outright ban.

Woolf shared with FundFire how the proposal could have implications on how managers structure compensation packages for high-level recruits. “You do see companies pay for [non-compete] restrictions… Now, they’re not going to pay for that information. There’s a possibility at the highest level you could see comp packages go down because companies pay for those restrictions,” Woolf said.

With Law360, Woolf spoke to the lack of visibility of what happens when someone moves to a new employer. He noted that compliance with NDAs is “impossible to monitor” and many workers are under great pressure to use what’s in their head at a new employer. “There’s just no way to protect that through an NDA,” Woolf added.