FTC finalizes rule barring noncompete agreements

The Federal Trade Commission issued an ICBA-opposed final rule prohibiting companies from enforcing noncompete agreements.

Application: The rule exempts banks but applies to bank holding companies, affiliates, and subsidiaries. Further, the FDIC may choose to apply the FTC Act to banks.

Joint Letter: ICBA and other groups expressed opposition to the rule. In a joint letter last year, the groups said:

• Noncompetes serve vital business and employee interests by encouraging investment in employees and helping to protect intellectual property.

• The FTC’s own economist said noncompetes allow firms to reduce recruitment and training costs, offer higher wages to new employees, and promote innovation.

• The FTC lacks the statutory authority to issue the rule because the FTC Act does not authorize the agency to adopt generally applicable substantive rules defining unfair methods of competition.