and reduce overall economic and marketplace freedom. Additionally, the FTC cites that there are other methods to protect competition without imposing undue risks to workers and burdens on the economy. Putting the ban in a nutshell, it would bar employers from imposing non-compete clauses in employment contracts. It would also require employers with non-compete clauses in effect before this rule to rescind all non-compete clauses that were to exist at the time the law was to go into effect. With respect to the abovementioned rescission of prior-existing clauses, the rule would require the existing clauses to be rescinded within 180 days of the publication of the final rule and that employers provide notice to all currently employed and former employees, informing them that the non-compete clause is no longer effective and that they are no longer subject to it. There could be some potential limitations to the proposed ban, however. In the proposed rule itself, it suggests alternatives to the proposed rule for which the FTC seeks public comment on. For example, the proposed rule would not cover non-compete between franchisors and franchisees. The FTC seeks comment on whether such clauses should be covered between franchisors and franchisees and, if covered, whether there should be a categorical ban on such clauses or a rebuttable presumption of unlawfulness, or whether different types of clauses should be subject to different standards or exemptions. The FTC seeks similar comments on similar considerations regarding senior executives and treating low/high-wage workers differently. Although the proposed rule has no immediate effect, employers may consider taking proactive measures to demonstrate good faith compliance should the rule go into effect or lean towards the attitudes/trends of the FTC and other agencies regarding these clauses, even if the rule were to not go into effect. These proactive measures may include prohibiting the use of non-compete clauses in contracts, using non-compete clauses in the meantime but making sure they are specific in scope and not overburdensome, and auditing current contracts. If the bank chooses to audit current contracts, it should be doing a careful review looking for non-compete clauses and de facto non-compete clauses as described previously, and get a head start on determining what action to take with the identified clauses should the rule go into effect. w Prince Girn serves C/A as an Associate General Counsel. Prince’s focus is as a member of the expert Hotline team at Compliance Alliance, where his knowledge in areas of lending, real estate, and credit procedures makes him an asset for our member banks. He is also a writer for the Bankers Alliance monthly magazine and other state banker publications. Our Mission Is to Help You Succeed Partner with us for: • Loan participation purchases and sales* • Bank stock financing • Bank executive and employee financing www.bell.bank | Member FDIC Tracy Peterson Call me at 480.259.8280 Based in Phoenix Ariz. Serving Arizona, Colorado and Kansas 38544 *We do not reparticipate loans. The data the FTC presents supports the notion that noncompete clauses significantly reduce earnings for workers and cause exploitation, stifle entrepreneurship and new ideas, and reduce overall economic and marketplace freedom. 17 AZBANKERS.ORG
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