On January 11, 2023, Elizabeth Wilkins, the FTC’s Director of the Office of Policy Planning, spoke to the Capitol Forum about the FTC’s proposed rule to ban non-compete agreements.  This conversation was the most significant discussion of the proposed rule by the FTC since it was announced on January 5.  Below are the four most salient takeaways.

  1. The FTC recognizes this policy could potentially have far-reaching implications across industries and encompass “functional non-competes.”  Wilkins explained that the proposed rule would apply to “all workers” who are “under the jurisdiction of the FTC,” whether an employee is paid, unpaid, or an independent contractor.  Throughout the interview, Wilkins described how other types of agreements and restrictive covenants not included within the rule’s definition of a prohibited non-compete clause can be “functional non-compete[s]” covered by the rule.  For one, though “ordinary” non-solicitation agreements would generally not be covered, they could potentially be prohibited by the rule if they are “so onerous” as to functionally prevent an employee from leaving the employer.  Additionally, while they are generally not covered by the rule, training repayment agreements could also be covered where they are grossly “disproportionate” to the cost of the training.
  2. The FTC is still defining the contours of the rule’s applicability, in part, based on public comments.  When asked about borderline situations relating to training repayment agreements, Wilkins answered that the FTC “will look at the comment record to see if [the FTC] get[s] useful guidance from the public.”
  3. The FTC believes the proposed rule fits squarely within its statutory authority under Section 5 of the Federal Trade Commission Act.  Wilkins stated that the FTC has the power to make rules as to “unfair methods of competition,” and pointed to the agency’s subject-matter expertise in this area.  Wilkins took the position that “far from not having authority, [the FTC] had a clear impetus” and potential obligation to deploy its rulemaking authority to address the “widespread competitive harms” caused by non-competes.  The FTC has recently embraced a more expansive view of enforcement, targeting non-competes under its Section 5 powers which transcend traditional antitrust laws.
  4. The FTC is unlikely to consider ancillary benefits to non-competes.  According to Wilkins, nondisclosure agreements and trade secret protections are an “adequate substitute” for business owners seeking to replace non-competes prohibited by the rule.  As such, the FTC is unlikely to acknowledge any benefits associated with non-competes or other restrictive covenants.

Ms. Wilkins’ statements reinforce the FTC’s heightened focus on targeting non-compete agreements, while providing businesses with some much-needed guidance as to how they might be affected.  In the meantime, employers should ensure compliance with existing state laws and best practices for their use of non-competes.

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Photo of Erica T. Jones Erica T. Jones

Erica Jones is an associate in the firm’s Litigation Department, where her practice encompasses a range of business, regulatory, and corporate governance matters. She has worked extensively in defense of securities class actions, derivative suits, and white collar criminal matters involving investigations by…

Erica Jones is an associate in the firm’s Litigation Department, where her practice encompasses a range of business, regulatory, and corporate governance matters. She has worked extensively in defense of securities class actions, derivative suits, and white collar criminal matters involving investigations by the SEC, DOJ, and state attorneys’ offices. In addition, Erica has advised on antitrust matters involving allegations of price fixing, restraint of supply, monopolization, group boycott, bid rigging, and collusion across industries that include agriculture and health care. She is also a member of the litigation team representing the Financial Oversight and Management Board in the Commonwealth of Puerto Rico’s bankruptcy proceedings.

Erica maintains an active, diverse pro bono practice, with a focus on immigration law, compassionate release and habeas corpus, and racial justice. She is an associate trustee with the Washington Lawyers’ Committee for Civil Rights and Urban Affairs and has been recognized by the District of Columbia Courts’ Capital Pro Bono Honor Roll. Erica was also one of a few women selected to be a Protégée for Proskauer’s Women Sponsorship Program, an initiative for high performing midlevel lawyers that champions emerging leaders.

Erica strives to stay on the cutting edge of developing areas of law through her membership in Proskauer’s COVID-19 Task Force, ESG Working Group, and Private Credit Litigation Group.  Erica’s ability to advocate for her clients is further bolstered by her recent Master’s Degree in Accounting from the University of North Carolina’s Kenan-Flagler Business School with a concentration in Financial Reporting and Analysis.

Prior to joining Proskauer, Erica was an intern with the Department of Justice in the Constitutional and Specialized Tort Litigation Section. Outside of her career in the law, Erica has been featured on Fox’s So You Think You Can Dance, teaching ballroom dance to students at Lighthouse for the Blind.

Photo of Reut N. Samuels Reut N. Samuels

Reut is an associate in the Litigation Department and a member of the Antitrust Practice and Asset Management Groups. During her time at the firm, she spent a five-month secondment working pro bono for the City of New York in the Torts Division…

Reut is an associate in the Litigation Department and a member of the Antitrust Practice and Asset Management Groups. During her time at the firm, she spent a five-month secondment working pro bono for the City of New York in the Torts Division, Special Litigation Unit.

Reut earned her J.D. from New York University School of Law and her B.S. from Cornell University. During law school, she worked at the US Attorney’s Office, Criminal Division in the Southern District of New York, as well as at the Manhattan District Attorney’s Office. Reut served as an Articles Editor for the Journal of Legislation and Public Policy.

Photo of Scott Tan Scott Tan

Scott Tan is a law clerk in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration Group.

Scott earned his J.D. from the UCLA School of Law, where he served as a problem developer and member of…

Scott Tan is a law clerk in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration Group.

Scott earned his J.D. from the UCLA School of Law, where he served as a problem developer and member of the Moot Court Honors Board. He also worked as a research assistant for Dean Jennifer Mnookin and Professor Hiroshi Motomura.

Photo of Colin Kass Colin Kass

Colin Kass is a partner in the Litigation Department and Co-Chair of Proskauer’s Antitrust Group. As a seasoned trial lawyer, Colin has handled many of the nation’s most complex and innovative antitrust cases over the past 20 years.

His practice involves a wide…

Colin Kass is a partner in the Litigation Department and Co-Chair of Proskauer’s Antitrust Group. As a seasoned trial lawyer, Colin has handled many of the nation’s most complex and innovative antitrust cases over the past 20 years.

His practice involves a wide range of industries, including financial services, healthcare, sports, media, pharmaceuticals, and automotive markets, and spans the full-range of antitrust and unfair competition-related litigation, including class actions, competitor suits, dealer/distributor termination suits, price discrimination cases, criminal price-fixing probes, and merger injunctions.

Colin also has extensive experience interfacing with the Federal Trade Commission and Department of Justice, obtaining clearance for competitively-sensitive transactions and handling anticompetitive practices investigations.

As a trusted advisor, Colin also counsels clients on their sales, distribution, and marketing practices, strategic ventures, and general antitrust compliance.

Photo of David Munkittrick David Munkittrick

David Munkittrick is a litigator and trial attorney. His practice focuses on complex and large-scale antitrust, copyright and entertainment matters in all forms of dispute resolution and litigation, from complaint through appeal.

David has been involved in some of the most significant antitrust…

David Munkittrick is a litigator and trial attorney. His practice focuses on complex and large-scale antitrust, copyright and entertainment matters in all forms of dispute resolution and litigation, from complaint through appeal.

David has been involved in some of the most significant antitrust matters over the past few years, obtaining favorable results for Fortune 500 companies and other clients in bench and jury trials involving price discrimination and group boycott claims. His practice includes the full range of antitrust matters and disputes: from class actions to competitor suits and merger review. David advises antitrust clients in a range of industries, including entertainment, automotive, pharmaceutical, healthcare, agriculture, hospitality, financial services, and sports.

David also advises music, publishing, medical device, sports, and technology clients in navigating complex copyright issues and compliance. He has represented some of the most recognized names in entertainment, including Sony Music Entertainment, Lady Gaga, U2, Madonna, Daft Punk, RCA Records, BMG Music Publishing, Live Nation, the National Academy of Recording Arts and Sciences, Universal Music Group and Warner/Chappell.

David maintains an active pro bono practice, supporting clients in the arts and in immigration proceedings. He has been repeatedly recognized as Empire State Counsel by the New York State Bar Association for his pro bono service, and is a recipient of Proskauer’s Golden Gavel Award for excellence in pro bono work.

When not practicing law, David spends time practicing piano. He recently made his Carnegie Hall debut at Weill Recital Hall with a piano trio and accompanying a Schubert lieder.

David frequently speaks on antitrust and copyright issues, and has authored or co-authored numerous articles and treatise chapters, including:

  • Causation and Remoteness, the U.S. Perspective, in GCR Private Litigation Guide.
  • Data Breach Litigation Involving Consumer Class Actions, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • Location Privacy: Technology and the Law, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • FTC Enforcement of Privacy, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • The Role of Experts in Music Copyright Cases, Intellectual Property Magazine.
  • Nonprofit Education: A Historical Basis for Tax Exemption in the Arts, 21 NYSBA Ent., Arts, & Sports L.J. 67
  • A Founding Father of Modern Music Education: The Thought and Philosophy of Karl W. Gehrkens, Journal of Historical Research in Music Education
  • Jackson Family Wines, Inc. v. Diageo North America, Inc. Represented Diageo in trademark infringement litigation