FTC Rule Would Prohibit Most Non-Compete Clauses in Worker-Franchise Agreements

The Federal Trade Commission (FTC) recently voted to issue a Non-Compete Clause Rule that will ban most non-compete clauses in agreements between businesses and their workers. However, this rule may face legal challenges from companies like Ryan, LLC and the U.S. Chamber of Commerce. If the rule takes effect, it will impact non-compete clauses in agreements between workers and franchisees or franchisors. Franchisors need to review their agreements to ensure compliance with the upcoming rule.
It is important to note that the rule will not apply to franchisors in the context of a franchisee-franchisor relationship, which is seen as more similar to a relationship between two businesses rather than an employer and a worker. Franchisors commonly use non-compete clauses to restrict franchisees from operating competing businesses during and after the terms of their franchise agreements.
The rule is in line with the proposed rule published in January 2023 and does not cover non-compete clauses in franchise agreements. It is important for franchisors and franchisees to stay informed about changes in state laws and federal and state antitrust laws regarding non-compete clauses. For more information on the rule, you can visit Akerman’s HR Defense blog. Akerman’s Franchise and Licensing Sector Team is also available to provide guidance on the rule and other franchise-related issues. Stay informed and compliant with the latest updates in non-compete regulations.

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