Erik W. Weibust, Member of the Firm in the Litigation & Business Disputes and Employment, Labor & Workforce Management practices, in the firm’s Boston office, was quoted in The Business Journals, in “The FTC Is Poised to Ban Noncompetes. Here’s What Experts Say Could Happen Next.” by Andy Medici. (Read the full version – subscription required.)
Following is an excerpt:
We asked experts to weigh in on what the final rule might look like and what would happen after it's finalized. …
Erik Weibust, an attorney at Epstein Becker Green PC and co-host of the trade secrets podcast Spilling Secrets, said it has taken a long time for the final rule to be issued because the FTC has a legal obligation to review the comments they received — all 26,000 of them. …
The rule exempts noncompete clauses that stem from a person willingly selling a business entity or otherwise disposing of their ownership interest in a business entity, the FTC said.
But, Weibust said, the mergers and acquisitions exemption is extremely limited, as it only applies to sellers who own 25% or more of the equity in the business, while the vast majority of larger businesses have owners that retain less than that. …
Legal experts say the FTC will either keep the final rule the same as what's been proposed or make limited changes. That could include setting an income cap on the ban or making exceptions for senior executives at companies. …
Weibust believes the FTC will not make any changes, since it has been a signature issue of the agency and of Chair Lina Kahn.
“I think the rule that they issue will be virtually identical to the proposed rule,” Weibust said. “I see this as kind of a pet project of hers.” …
Legal experts agree the final rule will be challenged in court, with the U.S. Chamber of Commerce already publicly vowing to do so. A challenge to the rule would likely result in an injunction until the case is ruled upon, most likely by the Supreme Court, a process that could take several years.
Experts say challenges will likely focus on whether the FTC has the authority to ban noncompetes under the Federal Trade Commission Act as well as whether the agency has the authority to issue rules on what has historically been a state issue.
"In my view, a challenge likely to succeed. The Supreme Court will strike down," Weibust said.
