Matthew Bolewitz • January 15, 2023

A new proposed rule by the FTC can impact employers

FTC’S PROPOSED BAN ON NEARLY ALL NON-COMPETES


On January 5, 2023, the Federal Trade Commission (“FTC”) published a proposed rule that would ban nearly all past, current, and future non-compete agreements, with limited exceptions. 


PURPOSE


The FTC determined that nearly one in five Americans (approximately 30 million people) are bound by a non-compete clause. It is the FTC’s position that such restrictive clauses create decrease competition, prevent new businesses from forming, stifle entrepreneurship, and prevent novel innovation that would otherwise occur without such restrictions. It is the FTC’s position that the removal of non-compete clauses would increase American workers’ earnings between $250 billion and $296 billion per year.


BREAKING DOWN THE PROPOSED RULE


WHAT IS COVERED?


The FTC’s proposed rule considers it an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker, maintain a non-compete clause, or represent to a worker that the worker is subject to a non-compete clause.


The FTC defines a “non-compete clause” as a contractual term between an employer and worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer. The term “worker” includes without limitation, an employee, independent contractor, extern, intern, volunteer apprentice, or sole proprietor who provides a service to a client or customer.


Ultimately, this definition expands the scope of coverage from the traditional non-compete agreements executed between the employer and worker. Instead, the FTC will utilize a “functional test” to determine whether the terms of employment are de facto non-compete clauses. As an example, a non-disclosure or non-solicitation agreement that is written so broadly that it effectively precludes the worker from working in the same field as the employer after termination would be considered a non-compete clause under this proposed rule.


WILL NON-COMPETES ALREADY IN EXISTENCE BE AFFECTED?


The short answer – yes. The FTC’s proposed rule would require an employer to rescind any and all non-compete clauses with its workers. This includes any non-complete clauses with prior workers as well. In order to comply with the proposed rule, employers would be required to provide notice of such rescission to both existing workers as well as former workers that are bound by a non-compete clause. Such notices would include an acknowledgment that the worker’s non-compete clause is no longer in effect and may not be enforced against the worker.


CAN A NON-COMPETE FIT INTO AN EXCEPTION?


Yes – in limited circumstances. The FTC’s proposed rule would not apply to non-competes entered into between a buyer and seller of a business or otherwise all of the seller’s ownership interest in a business entity as long as the seller is holding at least a 25% interest in the business.


CAN MY STATE OVERCOME THE FTC’S RULE?


If the proposed rule becomes final, it would supersede any State’s statutes, regulations, orders, or interpretations of them that are not consistent with the proposed rule. A State would continue to be permitted to impose restrictions on non-compete clauses that provide greater protections to the worker than is provided under the proposed rule.


WHAT IS NEXT?


The proposed rule is the first step in the FTC’s rulemaking process. After publishing a proposed rule in the Federal Register, the FTC will receive public comments which are due within 60 days. Here, the comment period is open through March 10, 2023. Thereafter, The FTC may make additional changes or modifications before submitting the final rule. A final rule would take effect upon 60 days after its publication in the Federal Register. Important for employers, the compliance deadline would then be set 180 days thereafter.


It is possible the proposed rule may eventually be struck down; however, it is a good time for businesses to spend some time reviewing their policies and procedures. In addition, with such uncertainty, businesses should audit and determine their risk profile as it pertains to their non-compete clauses.  As always, for assistance or more information, please contact Matthew Bolewitz, Partner at Cozza Law Group at (412) 294-8444 or mbolewitz@cozzalaw.com. We would be happy to help.


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How Business Litigation Protects Companies From Costly Disputes

By Rocco Cozza • April 19, 2026
How Business Litigation Protects Companies From Costly Disputes Although there are many costs involved in doing business, disputes can take a particularly high toll on a company's finances. These disputes might involve contract breaches, copyright violations, premises liability lawsuits, allegations of fraud, and much more. The obvious strategy is to avoid these disputes at all costs. How does business litigation fit into this equation? Can a company use business litigation to strategically protect itself from disputes? These are questions you might want to explore with an experienced business litigation lawyer in Pittsburgh . Business Litigation Strategies Are Often Preventive in Nature Many business litigation strategies are preventative in nature. In other words, companies take effective, early legal steps to eliminate the chances of disputes and legal action at a later date. One example of this is an effective business contract. When drafted properly, a business contract leaves little room for litigation or any other disputes. Many contracts contain arbitration or mediation clauses. These clauses force parties toward private negotiations instead of the courtroom floor. This private “alternative dispute resolution” (ADR) process is inherently cheaper, faster, and more private than litigation. Once a dispute reaches the courtroom, companies must pay much higher legal fees. They also face longer timelines. One of the biggest downsides of litigation for companies is its public nature. Many companies desperately need to keep sensitive information out of the public eye, whether that includes baseless allegations, copyrighted material, trade secrets, or more. Private negotiations can be so quick that they can hardly be called “disputes,” and issues may be resolved in a matter of weeks. In an ideal world, these disputes never even happen in the first place. A strong contract lays out clear responsibilities and privileges for each party, leaving little room for misinterpretation. Another obvious way to avoid business litigation is by choosing appropriate business partners. Another preventative business litigation strategy involves liability waivers. Although these waivers are not as effective as some company leaders assume, they can nonetheless prevent many needless or frivolous lawsuits. Liability waivers are not appropriate or possible in all industries, but they could be worth considering for businesses that welcome large numbers of patrons onto their premises. Business Litigation Strategies May Involve Regulatory Compliance Sometimes, the biggest legal threat to a business is not a partner or a customer, but rather the government. Regulatory compliance is an incredibly important business litigation strategy, and company leaders should consider consulting with lawyers who understand the specific regulations and laws that pertain to their industries. For example, a company that deals with industrial waste or chemicals may need to become highly familiar with the environmental laws. Generally speaking, these laws become more restrictive each year. Company leaders may need to keep a close eye on regulatory changes to ensure compliance. A company in another industry might deal with a substantial number of employees. If this is the case, the company might need to pay close attention to labor laws, discrimination laws, religious rights, and many other factors that can lead to employment lawsuits. Poaching is another issue that could be concerning, as are non-compete clauses. An experienced business litigation law firm may be able to help companies draft policies and contracts that drastically limit the number of employment-based legal issues in the future. For example, a company might have to follow strict guidelines if it wants to create enforceable non-compete clauses in Pennsylvania. Organized Corporate Governance Can Reduce Litigation and Disputes Many business disputes stem from poor, disorganized corporate governance. When the working relationship between shareholders, partners, and the executive suite begins to fall apart, disputes are inevitable. Effective shareholder agreements and organized record-keeping can go a long way in making sure everyone is on the same page. Business Litigation Attorneys Can Help With Risk Assessment Sometimes, dispute prevention starts with risk assessment. If company leaders become aware of a potential legal risk, they might consider a different approach or business strategy. For example, a company might consider entering into a new contract with a supplier. A business litigation attorney may be able to conduct effective legal research into the new supplier to determine the legal risk associated with a new contract. Perhaps the new supplier tends to get into lawsuits with its partners. Maybe the company is already in the process of being sued. Whatever the case may be, an experienced lawyer can help company leaders assess the legal risks associated with certain actions before moving forward. Most Disputes Never Reach the Trial Stage Since parties usually understand the downsides of going to trial, they tend to settle their disputes outside of court. This means that disputes rarely escalate into trials. However, this does not necessarily mean that a privately settled dispute is not costly for a company. Instead, a settlement could be disastrous for a company. This is why it makes sense to negotiate effectively, even if you’re dealing with someone who agrees to mediation or arbitration. Business litigation attorneys are often effective negotiators, and they can guide both parties toward mutually beneficial outcomes. If the goal is to reduce the cost of a dispute, a lawyer can push back with effective counterpoints and counteroffers. If the goal is to gain as large a settlement as possible, your lawyer can advocate on your behalf and reject lowball offers. Can a Business Litigation Lawyer in Pittsburgh Help My Company? Whether you are facing a dispute or you simply want to avoid the possibility of legal action in the future, a business litigation lawyer in Pittsburgh may be able to help. These lawyers can help your company take preventative steps, such as creating effective contracts or liability waivers. A business litigation attorney can also help you if your company is already facing a serious dispute or lawsuit. Consider reaching out to Cozza Law Group, PLLC, at (412) 790-2789 to learn more about your next potential steps. You can also find us online .