Benjamin Dryden on FTC Noncompete Ban – ‘Let’s allow the process to play out’
Foley & Lardner LLP partner Benjamin Dryden provided insight on the impact of the U.S. Federal Trade Commission’s rule prohibiting employers from imposing noncompete agreements on workers in the National Law Journal article, “Divided FTC Finalizes Rule to Ban Noncompete Agreements,” and Behavioral Health Business article, “FTC Noncompete Ban Presents Several Trade-Offs For Behavioral Health.”
The controversial rule has already spurred challenges, including a lawsuit from the U.S. Chamber of Commerce.
“There’s no question that there is more risk to entering into a noncompete agreement today than yesterday,” said Dryden, who is chair of Foley’s Antitrust & Competition Practice, told the National Law Journal. “There’s no question. So that absolutely changes the conversation.”
“But we’re going to watch this Chamber of Commerce litigation and see what other litigations have followed or will follow,” Dryden added. “And I would advise a client not to do anything drastic just yet, and let’s allow the process to play out.”
The prohibition on noncompete agreements will not apply when someone sells a business or their stake in it, Dryden told Behavioral Health Business. This contrasts with the originally proposed rule, which applied an exemption depending on the size of stake being sold, but Dryden said that there was “real concern that no buyer in good faith is going to buy a business where the only assets of that business are the knowledge workers who work for it.”
Dryden also noted that because the FTC’s jurisdiction does not apply to all nonprofit organizations, some nonprofit behavioral health providers may not be subject to the noncompete ban. “If you’re in that situation where you genuinely believe that you are exempted from the rule, but some court after the fact says, ‘No, you’re actually subject to the rule,’ there’s some grace there,” he said, as an employer has a good-faith basis to believe the final rule is inapplicable.
Dryden added that some nonprofit behavioral health providers would have the benefit of hiring employees previously engaged at for-profit entities as well as the benefit of still using noncompetes.
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