De Facto Noncompetes Could Vastly Widen FTC Rule’s Reach

Eric Akira Tate spoke to Law360 about the Federal Trade Commission (FTC) proposing a nearly complete ban on noncompete agreements (NCAs) and its plan to forbid “de facto” noncompetes.

To justify banning noncompetes, the FTC is counting on "appropriately tailored" nondisclosure agreements as an adequate safeguard, though the language that may be affected by its ban on "NCAs that are usually broad in scope [that] may function as de facto non-compete clauses" is widely used in contracts.

"You typically don’t want to run the risk of drafting something too narrow," Eric said. "A lot of them, they’re drafted broadly. Intentionally and necessarily just to get the proper protection."

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