The Federal Trade Commission (FTC) has been actively working to implement a nationwide ban on non-compete agreements. Here's the current status and what this means for employers and employees:

1. Proposed Rule by the FTC

In January 2023, the FTC proposed a rule that would ban non-compete clauses in employment contracts across the United States. The proposed rule would:

• Prohibit employers from entering into, maintaining, or enforcing non-compete agreements with employees, independent contractors, and even unpaid workers.
• The rule also includes a provision to void any existing non-compete clauses.
• The goal is to promote fair competition, improve worker mobility, and prevent the practice from stifling wage growth, which has been a growing concern for many workers, especially in industries with high demand for talent.
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2. Reason Behind the Ban

 

The FTC argues that non-compete agreements:

• Harm workers by limiting their ability to seek new opportunities and negotiate higher wages, especially in industries where employees possess valuable skills.
• Hurt competition, especially when employers can lock in workers with restrictive contracts, reducing overall mobility in the job market.
• Exacerbate wage inequality by keeping workers confined to lower-paying positions due to lack of access to competing employers.

3. Status of Implementation

• The nationwide non-compete ban is still in the proposal stage and is subject to public comment. The FTC received thousands of comments from stakeholders, including businesses, labor advocates, and legal professionals. Many comments raised concerns about how the rule could impact certain industries and whether it would be overly broad.
• The FTC plans to issue a final rule sometime in 2025, though there could be delays depending on how the rule is revised and what changes are made following public feedback.

4. What’s Going on in Washington State?

 

Key Provisions of Washington’s Non-Compete Act Include:

• Income Thresholds:
  A non-compete agreement is enforceable only if:
• The worker earns more than $100,000 per year (adjusted annually for inflation — in 2025, the threshold is higher; it's about $112,000/year).
• For independent contractors, the earnings threshold is about $280,000/year.

• Duration Limits:
  Non-competes longer than 18 months are presumed unreasonable and unenforceable unless the employer can prove to a court that a longer restriction is necessary.

• Advance Disclosure:
  Employers must disclose the terms of the non-compete at the time of making an offer or before the employee accepts the job offer. If a non-compete is added after employment begins, it must be supported by additional consideration (like a promotion or a bonus — continued employment alone is not enough).

• Inflation Adjustments:
   Washington adjusts the income thresholds annually based on inflation.

 

5. What Can Employers Do Now?

 

While the FTC's proposed rule is still under review, employers should start:

• Reviewing existing non-compete agreements in place with employees and contractors. If the ban is enacted, those agreements may need to be revised or terminated.
• Considering the use of other contractual protections, such as non-disclosure agreements (NDAs), non-solicitation agreements, and confidentiality clauses, to safeguard their business interests without resorting to non-competes.
• Staying informed about both federal and state regulations to ensure compliance as the legal landscape evolves.

Call Limitless Law PLLC at 360-685-0145 or click here to learn more about working with our firm if you have questions or concerns about your rights and obligations as an employer, or if you want assistance in reviewing your employment contracts and policies to ensure that they comply with the changing laws.

This blog post is for informational purposes only and does not constitute legal advice. If you have questions about your own legal rights and options, please contact the knowledgeable team at Limitless Law PLLC to schedule a strategy session with our attorney. Call 360-685-0145 or click here to learn more.