The Federal Trade Commission has proposed a rule to ban noncompete clauses in employment contracts. The rule does not directly apply to all types of employment restrictions, but some restrictions, such as nondisclosure agreements, could be subject to the rule if they are broad enough in scope.

Many manufacturers use noncompete agreements to ensure that their intellectual property is protected when key employees seek a new position at a different company. Under this proposed ban, small and medium-sized manufacturers are therefore at risk of their proprietary information and industrial processes, along with other employee knowledge, becoming more accessible to their competitors.

Manufacturers are strongly opposed to this proposed rule as it demonstrates extreme overreach on the FTC’s part. The NAM is currently preparing formal comments. The NAM, along with nearly 100 trade and state associations joined a US Chamber of Commerce letter asking the FTC for a 60-day extension for comments.