View source for Non-compete clause

{{Short description|Term in contract law where a person agrees not to compete}}
In [[contract]] [[law]], a '''non-compete clause''' (often '''NCC'''), '''restrictive covenant''', or '''covenant not to compete''' ('''CNC'''), is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer). In the [[labor market]], these agreements prevent workers from freely moving across employers, and weaken the bargaining leverage of workers.<ref name=":0">{{Cite journal |last=Lavetti |first=Kurt |date=2021-09-01 |title=Noncompete agreements in employment contracts |url=https://wol.iza.org/articles/noncompete-agreements-in-employment-contracts/long |journal=IZA World of Labor |language=en-US |doi=10.15185/izawol.486|doi-access=free |hdl=10419/260720 |hdl-access=free }}</ref>
Non-compete agreements are rooted in the medieval system of [[apprenticeship]] whereby an older master craftsman took on a younger apprentice, trained the apprentice, and in some cases entered into an agreement whereby the apprentice could not compete with the master after the apprenticeship.<ref name=":1">{{Cite book |last=Posner |first=Eric A. |url=https://books.google.com/books?id=oHs_EAAAQBAJ |title=How Antitrust Failed Workers |date=2021 |publisher=Oxford University Press |isbn=978-0-19-750762-9 |pages=91–113 |language=en}}</ref> Modern uses of non-compete agreements are generally premised on preventing high-skilled workers from transferring [[Trade secret|trade secrets]] or a customer list from one firm to a competing firm, thus giving the competing firm a competitive advantage.<ref name=":0" /><ref name=":1" /> However, many non-compete clauses apply to low-wage workers or individuals who do not possess transferable trade secrets.<ref name=":1" />
The extent to which non-compete clauses are legally allowed and enforced varies under different jurisdictions. Some localities and states ban non-compete clauses or highly restrict their applicability. In jurisdictions where non-compete agreements are legal, courts tend to evaluate whether a non-compete agreement covers a worker's move to a relevant industry and reasonable geographic area, as well as whether the former is still bound by the agreement over a reasonable time period. An employer bringing a lawsuit may also be asked to identify a protectable business interest that was harmed by the employee's move to a different firm.<ref name=":1" />
Research shows that non-compete agreements make labor markets less competitive, reduce wages and reduce labor mobility.<ref name=":2">{{Cite journal |last=Manning |first=Alan |date=2021 |title=Monopsony in Labor Markets: A Review |url=http://journals.sagepub.com/doi/10.1177/0019793920922499 |journal=ILR Review |language=en |volume=74 |issue=1 |pages=3–26 |doi=10.1177/0019793920922499 |s2cid=213995471 |issn=0019-7939}}</ref><ref name=":0" /> While non-compete agreements may incentivize company investment into their workers and research, they may also reduce innovation and productivity by employees who may be forced to leave a sector when they leave a firm.<ref name=":3">{{Cite journal |last=Marx |first=Matt |date=2011 |title=The Firm Strikes Back: Non-compete Agreements and the Mobility of Technical Professionals |url=http://journals.sagepub.com/doi/10.1177/0003122411414822 |journal=American Sociological Review |language=en |volume=76 |issue=5 |pages=695–712 |doi=10.1177/0003122411414822 |s2cid=154909483 |issn=0003-1224}}</ref><ref name=":5">{{Cite journal |last=Mueller |first=Clemens |date=2022 |title=Non-Compete Agreements and Labor Allocation Across Product Markets |url=http://dx.doi.org/10.2139/ssrn.4283878 |journal=SSRN Electronic Journal |doi=10.2139/ssrn.4283878 |hdl=10419/277621 |s2cid=258737812 |issn=1556-5068|hdl-access=free }}</ref> [[Labour movement|The labor movement]] tends to advocate for restrictions on non-compete agreements while support for non-compete agreements is common among some employers and business associations.
==History==
As far back as ''[[Dyer's Case]]'' in 1414, English [[common law]] chose not to enforce non-compete agreements because of their nature as [[Restraint of trade|restraints on trade]].{{sfnp|Blake|1960|p=625}} That ban remained unchanged until 1621, when a restriction that was limited to a specific geographic location was found to be an enforceable exception to the previously absolute rule. Almost a hundred years later, the exception became the rule with the 1711 watershed case of ''[[Mitchel v Reynolds]]''<ref>''[[Mitchel v. Reynolds]]'', 24 Eng. Rep. 347 (Q.B. 1711)</ref> which [[Precedent|established the modern framework]] for the analysis of the enforceability of non-compete agreements.<ref>C. L. Fisk, Working Knowledge: Trade Secrets, Restrictive Covenants in Employment, and the Rise of Corporate Intellectual Property, 1800-1920, 52 Hastings Law Journal no. 2, 453-54 (2001); ''see also'' ''Alger'', 36 Mass. at 53.</ref>
Traditionally, non-competes were used to prevent high-skilled workers from transferring [[Trade secret|trade secrets]] or a customer list from one firm to a competing firm.<ref name=":0" /><ref name=":1" /> However, such clauses can frequently be found in the contracts of low-wage workers and other workers who are unlikely to be in a position to share trade secrets.<ref name=":1" />
When courts consider the enforceability of non-compete agreements, they usually ask the employer to identify a protectable business interest that was harmed by the employee's move to a different firm. Courts consider whether the non-compete covers a relevant industry (does the worker do work for a firm in the same industry?), reasonable geographic area, and reasonable time period.<ref name=":1" />
University of Chicago Law School Professor Eric A. Posner has argued that since non-competes have an adverse impact on competition, they should be covered under a strong anti-trust regime, and the "law should treat noncompetes as presumptively illegal, allowing employers to rebut the presumption if they can prove that the noncompetes they use will benefit rather than harm their workers."<ref name=":1" />
In April, 2024, the [[Federal Trade Commission]] (FTC) banned all non compete agreements in the United States.<ref>{{Cite news |last=Ellis |first=Dave Michaels and Lindsay |title=FTC Bans Noncompete Agreements That Restrict Job Switching |url=https://www.wsj.com/politics/policy/ftc-bans-noncompete-clauses-that-restrict-job-switching-984d2187?mod=hp_lead_pos11 |access-date=2024-04-25 |work=WSJ |language=en-US}}</ref> Within a few days, business groups including the U.S. Chamber of Commerce sued to block the new rule.<ref>{{Cite news |last=Cutter |first=Lindsay Ellis and Chip |title=Workers Are Celebrating a Ban on Noncompetes. Employers Are Ready to Fight. |url=https://www.wsj.com/lifestyle/careers/workers-are-celebrating-a-ban-on-noncompetes-employers-are-ready-to-fight-e4a354e7?mod=wknd_pos1 |access-date=2024-04-25 |work=WSJ |language=en-US}}</ref>
==Impact==
Studies show that non-compete agreements make labor markets less competitive, reduce wages and reduce labor mobility.<ref name=":2" /><ref name=":0" /> Existing evidence suggests that the wage suppressing effects of non-competes are disproportionately concentrated on lower-income workers.<ref name=":0" /> Non-compete agreements can incentivize firms to increase investment into worker training and research, as those workers are less likely to leave the firm.<ref name=":0" /> Non-competes may reduce overall hiring costs and employee turnover for companies, which may result in savings that could in theory be passed on to customers in the form of lower prices and to investors as higher returns.<ref name=":1" />
Non-competes are more common for technical, high-wage workers and more likely to be enforced for those workers. However, even when non-compete agreements are unlikely to be enforced (such as for individual low-wage workers or in states that do not enforce these agreements), the agreements may still have an intimidating impact on those workers.<ref name=":2" /><ref>{{Cite journal |last=Starr |first=Evan |date=2020 |title=The Behavioral Effects of (Unenforceable) Contracts |url=https://doi.org/10.1093/jleo/ewaa018 |journal=The Journal of Law, Economics, and Organization|doi=10.1093/jleo/ewaa018 }}</ref>
A 2021 study of the [[Healthcare in the United States|U.S. health care]] sector from 1996&ndash;2007 found that noncompete agreements in this sector led to higher prices for physicians, smaller medical practices and greater medical firm [[Market concentration|concentration]].<ref>{{Cite journal|last1=Hausman|first1=Naomi|last2=Lavetti|first2=Kurt|date=2021|title=Physician Practice Organization and Negotiated Prices: Evidence from State Law Changes|url=https://www.aeaweb.org/articles?id=10.1257/app.20180078|journal=American Economic Journal: Applied Economics|language=en|volume=13|issue=2|pages=258–296|doi=10.1257/app.20180078|s2cid=56419347|issn=1945-7782}}</ref>
A 2021 study found that noncompete agreements for low-wage workers have been shown to lower wages; a study determined that the 2008 Oregon ban on noncompete agreements for workers paid by the hour "increased hourly wages by 2%–3% on average."<ref name="Lipsitz">{{Cite journal |last1=Lipsitz |first1=Michael |last2=Starr |first2=Evan |date=2021 |title=Low-Wage Workers and the Enforceability of Noncompete Agreements |url=https://pubsonline.informs.org/doi/10.1287/mnsc.2020.3918 |journal=Management Science |volume=68 |pages=143–170 |doi=10.1287/mnsc.2020.3918 |issn=0025-1909 |s2cid=233592840}}</ref> The study also showed that the Oregon ban on noncompete agreements for low-wage workers "improved average [[occupational status]] in Oregon, [[Labor mobility|raised job-to-job mobility]], and increased the proportion of salaried workers without affecting hours worked."<ref name="Lipsitz" />
Studies have found that non-compete agreements can prompt technical workers to involuntarily leave their technical field to avoid a potential lawsuit from their former employer.<ref name=":3" /><ref name=":5" /> For this reason, non-compete agreements have been linked to less innovation and lower productivity as inventors switch fields in order to avoid violating non-competes.<ref name=":5" />
==By country==
=== Belgium ===
In [[Belgium]], CNCs are restricted to new employments within Belgium and for no more than one year. The employer must pay financial compensation for the duration of the CNC, amounting at least half of the gross salary for the corresponding period.<ref>[http://www.droitbelge.be/fiches_detail.asp?idcat=25&id=208 Clause de non-concurrence – conditions de validité]. DroitBelge.net.</ref>
===Canada===
[[Canada|Canadian]] courts will enforce non-competition and [[Non-solicitation|non-solicitation agreements]]; however, the agreement must be limited in time frame, business scope, and geographic scope to what is reasonably required to protect the company's proprietary rights, such as confidential marketing information or client relations<ref>{{Cite web |url=http://www.cba.org/abc/nouvelles/pdf/ADD-enforceability.pdf |title=Enforceability of post-employment restrictions
|first=Michael P. |last=Fitzgibbon |access-date=2014-01-28 |archive-date=2013-04-24 |archive-url=https://web.archive.org/web/20130424080751/http://www.cba.org/ABC/nouvelles/pdf/ADD-enforceability.pdf }}</ref> and the scope of the agreement must be unambiguously defined. The 2009 [[Supreme Court of Canada]] case ''Shafron v. KRG Insurance Brokers (Western) Inc. 2009 SCC 6'' held a non-compete agreement to be invalid due to the term "Metropolitan City of Vancouver" not being legally defined.<ref>{{cite web
|url         = http://www.canadianlawyermag.com/Ambiguity-makes-non-compete-clause-invalid-SCC.html
|archive-url  = https://web.archive.org/web/20090710182555/http://www.canadianlawyermag.com/Ambiguity-makes-non-compete-clause-invalid-SCC.html
|archive-date = 2009-07-10
|title       = Ambiguity Makes Non-Compete Clause Invalid: SCC
|date        = 6 April 2009
|author      = Kelly Harris
}}</ref>
In 2021, employees in Ontario may no longer enter into non-compete agreements. There are exceptions for when a business is sold, and for chief officers (such as [[CEO|CEOs]], [[CFO|CFOs]], etc.).<ref>[https://www.ontario.ca/document/your-guide-employment-standards-act-0/non-compete-agreements "Non-compete agreements | Your guide to the Employment Standards Act"]. Province of Ontario. Last updated August 3, 2022. Retrieved June 30, 2023</ref>
=== France ===
In [[France]], CNCs must be limited in time to a maximum of two years and to a region where the employee's new work can reasonably be seen as competitive. The region can be a city or the whole country, depending on the circumstances. The employer must pay financial compensation, typically 30 percent of the previous salary.<ref>{{lang|fr|italic=no|[https://www.service-public.fr/particuliers/vosdroits/F1910 "Qu'est-ce qu'une clause de non-concurrence ?"]}}. Service-Public.fr</ref> A CNC may not unreasonably limit the possibilities of the employee to find new employment.
=== Germany ===
In [[Germany]], CNCs are allowed for a term up to two years. The employer must provide financial compensation for the duration of the CNC amounting to at least half the gross salary.<ref>[http://dejure.org/gesetze/HGB/74.html {{lang|de|cat=no|Handelsgesetzbuch}} §&nbsp;74, para. 2]</ref> Unreasonable clauses – for example, excluding similar jobs throughout the whole of Germany – can be invalidated.
===India===
Section 27 of the [[Indian Contract Act, 1872|Indian Contract Act]] has a general bar on any agreement that puts a restriction on trade.<ref>{{Cite web|url=http://www.vakilno1.com/bareacts/indiancontractact/indiancontractact.html#27_Agreement_in_restraint_of_trade_void|title = The Indian Contract Act 1872}}</ref> The Supreme Court of India has clarified that some non-compete clauses&mdash;specifically, those backed by a clear objective that is considered to be in advantage of trade and commerce&mdash;are not barred by Section 27 of the Contract Act, and therefore valid in India.<ref>{{cite CiteSeerX |last1=Choudhury |first1=Tathagata |title=Scrutinizing Non-Compete Agreements under the Indian Competition Regime |date=2012|citeseerx=10.1.1.650.7542 }}</ref>
=== Italy ===
Non-compete agreements are prevalent in Italy.<ref>{{Cite journal |last=Boeri |first=Tito |last2=Garnero |first2=Andrea |last3=Luisetto |first3=Lorenzo G |date=2024 |title=Noncompete agreements in a rigid labor market: the case of Italy |url=http://dx.doi.org/10.1093/jleo/ewae012 |journal=The Journal of Law, Economics, and Organization |doi=10.1093/jleo/ewae012 |issn=8756-6222}}</ref> In [[Italy]], CNCs are regulated by articles 2125, 2596, and 1751 bis of the civil code.
=== Netherlands ===
In the [[Netherlands]], non-compete clauses ({{lang|nl|non-concurrentiebeding}} or {{lang|nl|concurrentiebeding}}) are allowed regarding issues such as moving to a new employer and approaching customers of the old company. Unreasonable clauses can be invalidated in court.<ref>{{cite web |date=2023 |title=Gebonden aan concurrentiebeding? |language=nl |url=https://www.beaks.nl/concurrentiebeding/ |archive-url= |archive-date= |publisher=Beaks}}</ref>
===Pakistan===
According to Section 27 of the Contract Act, 1872, any agreement that restrains a person from exercising a lawful profession, trade or business is void.<ref>{{cite web | title = Labor and Employment Practice Group Non-Competition | url = http://www.lexmundi.com/Document.asp?DocID=1508 | publisher = LexMundi Puplications Ltd. | date = 2010 | access-date = 24 May 2016}}</ref> However, courts of Pakistan have made decisions in the past in favour of such restrictive clauses given that the restrictions are "reasonable".<ref>{{cite web | title = Can I be stopped from undertaking competitive work after resignation from a company? | url = https://lawyereadia.wordpress.com/tag/non-compete-clause/ | date = 13 March 2014 | access-date = 24 May 2016}}</ref> The definition of "reasonable" depends on the time-period, geographical location and the designation of employee. In the case of ''Exide Pakistan Limited vs. Abdul Wadood, 2008 CLD 1258 (Karachi)'', the High Court of Sindh stated that reasonableness of the clause will vary from case to case and depends mainly on duration and extent of geographical territory<ref>{{cite web | website = Counsel Pakistan |title= Corporate Decisions | url = http://www.counselpakistan.com/vol-1/legal-updates/corporate-decision.php}} See ''Exide Pakistan Ltd. vs. Malik Abdul Wadood'' 2009 CLD 716 (Division Bench – Karachi).</ref>
=== Portugal ===
In [[Portugal]], CNCs are regulated by article 136 of the labor code and restricted to two years extendible to three years in cases of access to particularly sensitive information. The employer must pay financial compensation for the duration of the CNC, but the law does not specify anything regarding the amount of the compensation.<ref>Portuguese labour code, [http://www.cite.gov.pt/pt/legis/CodTrab_L1_004.html#L004S9 Article 136]</ref>
=== Romania ===
In [[Romania]], CNCs are regulated by articles 21–24 of the labor code and restricted to two years. The employer must pay financial compensation for the duration of the CNC, amounting to at least 50 percent of the last 6 months salary.
=== Spain ===
In [[Spain]], CNCs are regulated by article 21 of the labor law. CNCs are allowed up to two years for technical professions and six months for other professions, given that adequate compensation is given.
=== United Kingdom ===
In the [[United Kingdom]], CNCs are often called [[restraint of trade]] or restrictive covenant clauses, and may be used only if the employer can prove a legitimate business interest to protect in entering the clause into the contract. Mere competition will not amount to a legitimate business interest.<ref>{{cite web|url=http://www.lawdit.co.uk/reading_room/room/view_article.asp?name=../articles/Restraint+of+Trade.htm|archive-url=https://web.archive.org/web/20120303191054/http://www.lawdit.co.uk/reading_room/room/view_article.asp?name=..%2Farticles%2FRestraint+of+Trade.htm|archive-date=3 March 2012|title=Restraint of trade clauses |website=Lawdit Reading Room|date=3 March 2012|access-date=9 February 2021}}</ref> The UK's regulator, the [[Competition and Markets Authority]], advises that non-compete clauses are a form of employer collusion and are a form of a business cartel.<ref>{{Cite web |title=Employers advice on how to avoid anti-competitive behaviour |url=https://www.gov.uk/government/publications/avoid-breaking-competition-law-advice-for-employers/employers-advice-on-how-to-avoid-anti-competitive-behavior |author=Competition & Markets Authority |access-date=2023-09-11 |website=GOV.UK |language=en}}</ref>
Restrictions are normally limited in duration, geographical area (an "area covenant"),<ref>{{cite BAILII |court=EWHC |division=Ch |year=2011 |num=367 |litigants=Francotyp-Postalia Ltd v Whitehead & Others |courtname=auto |juris=auto |date=25 February 2011 |access-date=7 March 2021}}</ref> and content.<ref>Thomson Reuters Practical Law, [https://uk.practicallaw.thomsonreuters.com/6-504-9611?contextData=(sc.Default)&transitionType=Default&firstPage=true High Court considers severance in non-compete clauses], accessed 7 March 2021</ref>
In the [[Crown dependencies]], many financial and other institutions require employees to sign 10-year or longer CNCs which could be seen to apply even if they leave the country or enter an unrelated field of work.{{cn|date=May 2024}}
In May 2023, the UK Government announced plans to limit non-compete clauses to a maximum of three months.<ref>{{Cite web |last=Moss |first=Rob |date=2023-05-12 |title=Non-compete clauses and proposed limits on their duration |url=https://www.personneltoday.com/hr/non-compete-clause-limit-duration/ |access-date=2023-05-12 |website=Personnel Today |language=en-GB}}</ref>
===United States===
{{main|Non-compete clauses in the United States}}
====Prevalence and status====
The majority of American states recognize and enforce various forms of non-compete agreements. A few states, such as California, [[North Dakota]], and [[Oklahoma]], totally ban noncompete agreements for employees, or prohibit all noncompete agreements except in limited circumstances.<ref>{{cite web|title=Study Finds Many Companies Require Non-Compete Clauses For Low-Wage Workers|url=https://www.npr.org/2016/11/07/501053238/study-finds-many-companies-require-non-compete-clauses-for-low-wage-workers|website=All Things Considered|publisher=Michigan Radio|access-date=11 June 2017|date=7 November 2016}} (Approximately 18 percent of the U.S. workforce is bound by a non-compete agreement.)</ref>
Data from 2018 indicates that non-compete clauses cover 18 percent of American [[Labor force participation rate|labor force participants]].<ref>{{Cite journal |last1=Starr |first1=Evan P. |last2=Prescott |first2=J. J. |last3=Bishara |first3=Norman D. |date=2021 |title=Noncompete Agreements in the US Labor Force |url=https://www.journals.uchicago.edu/doi/10.1086/712206 |journal=The Journal of Law and Economics |language=en |volume=64 |issue=1 |pages=53–84 |doi=10.1086/712206 |s2cid=234794516 |issn=0022-2186}}</ref> A 2023 petition to the FTC to ban non-compete agreements estimated that about 30 million workers (about 20% of all U.S. workers) were subject to a noncompete clause.<ref name="Bloomberg2019">{{Cite news|url=https://www.bloomberg.com/news/articles/2019-03-20/labor-groups-petition-u-s-ftc-to-prohibit-non-compete-clauses|title = U.S. Labor Groups Petition for Ban on Non-Compete Clauses|newspaper = Bloomberg|date = 20 March 2019}}</ref> While higher-wage workers are comparatively more likely to be covered by non-compete clauses, non-competes covered 14 percent of workers without college degrees in 2018.<ref>{{cite news|last=O'Brien|first=Matt|date=2018-10-18|title=Even janitors have noncompetes now. Nobody is safe|newspaper=[[The Washington Post]]|url=https://www.washingtonpost.com/business/2018/10/18/even-janitors-have-noncompetes-now-nobody-is-safe/|access-date=2018-10-19}}</ref> By some estimates, nearly half of all technical workers are covered by non-compete agreements.<ref name=":3" />
====Federal law====
In March 2019, Democratic officials, labor unions, and workers' advocacy groups urged the U.S. FTC to ban non-compete clauses. A petition to the FTC, seeking a ban on noncompete clauses, was submitted by the [[AFL-CIO]], [[SEIU]], and [[Public Citizen]].<ref name="Bloomberg2019"/> In July 2021, President Joe Biden signed [[Executive Order 14036]], directing the FTC (whose chair, [[Lina Khan]], he had recently appointed), as well as other federal agencies, to "curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility". On January 5, 2023, the FTC proposed a rule banning non-compete agreements.<ref>{{cite web|url=https://www.npr.org/2023/01/05/1147138052/workers-noncompete-agreements-ftc-lina-khan-ban |title=Millions of workers are subject to noncompete agreements. They could soon be banned|website=NPR|date=2023-01-05}}</ref>
The [[United States Chamber of Commerce|U.S. Chamber of Commerce]] has lobbied against bans on non-compete agreements; in 2023, it threatened to sue the FTC if it bans non-compete agreements.<ref name=":4">{{Cite web |last=Cox |first=Chelsey |date=2023-01-12 |title=U.S. Chamber of Commerce threatens to sue the FTC over proposed ban on noncompete clauses |url=https://www.cnbc.com/2023/01/12/us-chamber-of-commerce-threatens-to-sue-the-ftc-over-proposed-ban-on-noncompete-clauses.html |website=CNBC |language=en}}</ref> The Chamber argued that "noncompete agreements are an important tool in fostering innovation and preserving competition".<ref name=":4" />
====Federal Trade Commission====
On April 23, 2024, the [[Federal Trade Commission]] (FTC) issued a ban on nearly all non-compete agreements.<ref>{{Cite news |last=Moreno |first=J. Edward |date=2024-04-23 |title=F.T.C. Issues Ban on Worker Noncompete Clauses |url=https://www.nytimes.com/2024/04/23/business/noncompete-clause-ban.html |access-date=2024-04-23 |work=The New York Times |language=en-US |issn=0362-4331}}</ref><ref>{{cite press release|title=FTC Announces Rule Banning Noncompetes|url=https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes|publisher=Federal Trade Commission|date=2024-04-23}}</ref> The rule was published on the ''[[Federal Register]]'' on May 7 and was to go into effect on September 4, 2024.<ref>{{cite journal|url=https://www.federalregister.gov/documents/2024/05/07/2024-09171/non-compete-clause-rule|title=Non-Compete Clause Rule|journal=Federal Register|date=May 7, 2024|volume=89|issue=89|pages=38342–38506|id=89 FR 38342}}</ref>
The FTC found as shown the use of non-compete clauses by employers has negatively affected competition in labor markets, resulting in reduced wages for workers across the labor force—including workers not bound by non-compete clauses and that by suppressing labor mobility, non-compete clauses have negatively affected competition in product and service markets in several ways.<ref name="88 FR 3482">{{cite journal |title=Non-Compete Clause Rule |journal=Federal Register |date=January 19, 2023 |volume=88 |issue=12 |pages=3482–3546 |url=https://www.federalregister.gov/documents/2023/01/19/2023-00414/non-compete-clause-rule |access-date=26 April 2024 |id={{RIN|3084-AB74}}, 16 CFR 910, 88 FR 3482}}{{source-attribution}}</ref> The commission noted that the existing legal frameworks governing non-compete clauses—formed decades ago, without the benefit of this evidence—allow serious anticompetitive harm to labor, product, and service markets to go unchecked.<ref name="88 FR 3482"/> The Commission noted "that instead of using noncompetes to lock in workers, employers that wish to retain employees can compete on the merits for the worker's labor services by improving wages and working conditions."<ref name="Muoio2024">{{cite news |last1=Muoio |first1=Dave |title=FTC votes 3–2 on final rule to ban noncompete agreements, but legal challenges expected |url=https://www.fiercehealthcare.com/regulatory/ftc-votes-3-2-issue-final-rule-banning-noncompetes |access-date=26 April 2024 |publisher=Fierce Healthcare |date=April 23, 2024}}</ref> In 2024, approximately one in five American workers, or about 30 million people, are subject to noncompetes.<ref name="Muoio2024"/>
On August 20, 2024, Judge [[Ada Brown (judge)|Ada Brown]] of the [[United States District Court for the Northern District of Texas|District Court for the Northern District of Texas]] issued an injunction blocking the rule, ruling that the FTC "lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious."<ref>{{Cite web |last=Sahadi |first=Jeanne |date=2024-08-20 |title=US judge strikes down Biden administration ban on worker ‘noncompete’ agreements |url=https://www.cnn.com/2024/08/20/business/us-judge-strikes-down-noncompete-agreements/index.html |access-date=2024-08-21 |website=CNN |language=en}}</ref><ref>{{Cite news |last=Kaye |first=Danielle |date=2024-08-20 |title=Judge Blocks F.T.C.’s Noncompete Rule |url=https://www.nytimes.com/2024/08/20/business/economy/noncompete-ban-ftc-texas.html |access-date=2024-08-21 |work=The New York Times |language=en-US |issn=0362-4331}}</ref>
==Related restrictive covenants==
While CNCs are one of the most common types of restrictive covenants, there are many others. Each serves a specific purpose and provides specific rights and remedies. The most common types of restrictive covenants are as follows:
* [[Garden leave|Garden-leave clause]]: a type of CNC by which an employee is compensated during the period that the employee is restricted.
* Forfeiture-for-competition agreement and compensation-for-competition agreement: an agreement by which an employee either forfeits certain benefits or pays some amount of money to engage in activities that are competitive with his former employer.
* Forfeiture agreement: an agreement by which an employee forfeits benefits when his employment terminates, regardless of whether he engages in competitive activities.
* [[Non-disclosure agreement|Nondisclosure/confidentiality agreement]]: an agreement by which a party agrees not to use or disclose the other party's confidential information.
* [[Non-solicitation|Non-solicitation agreement]]: an agreement by which an employee agrees not to solicit and/or not to accept business from the employer's customers.
* Antipiracy agreement: an agreement by which an employee agrees not to solicit and/or not to hire the employer's employees.
* Invention assignment agreement: an agreement by which an employee assigns to the employer any potential inventions conceived of during employment.
The enforceability of these agreements depends on the law of the particular state. As a general rule, however, with the exception of invention assignment agreements, they are subject to the same analysis as other CNCs.<ref>{{cite web |url=https://www.computerworld.com/article/1555061/beyond-the-noncompete.html |first=Russell |last=Beck |title=Beyond the noncompete |work=Computer World |date=June 2, 2009 |access-date=May 19, 2024}}</ref>
'''No-poaching agreements''' between employers are typically considered illegal [[Anti-competitive practices|anti-competitive]] collusion. (See for example [[High-Tech Employee Antitrust Litigation]] concerning Silicon Valley employers in the 2000s.)
==References==
{{Reflist}}
===Works cited===
{{refbegin|35em}}
* {{cite journal | first=Harlan M. | last=Blake | title=Employee Contracts Not To Compete | journal=Harvard Law Review | volume=73 | number=4 | pages=625–91 | year=1960 | doi=10.2307/1338051 | jstor=1338051 }}
{{refend}}
==External links==
* [https://www.pbs.org/newshour/making-sense/know-non-compete-agreements/ What you should know about non-compete agreements], PBS
{{Authority control}}
{{DEFAULTSORT:Non-Compete Clause}}
[[Category:Contract law]]
[[Category:Covenant (law)]]
[[Category:Labour law]]
[[Category:Contract clauses]]