What is the FTC’s newest non-compete rule?
The Federal Trade Commission’s (FTC) newest non-compete rule bans non-compete clauses in employment contracts. A non-compete clause prohibits a worker from seeking or accepting work in a certain field or geographic radius. This new rule benefits workers because they are not restricted in seeking employment opportunities following the termination of an employment contract. The rule is set to go into effect on August 21, 2024, and employers will be required to alert their employees of the change and that their non-compete clauses are no longer valid. However, legal challenges from entities such as the Chamber of Commerce create some uncertainty regarding the rule’s implementation.
How are non-compete clauses relevant to influencers?
Influencers engage in contractual agreements with brands as independent contractors to develop content and endorse products. According to FTC guidelines, influencers are considered workers and are subject to FTC regulations within their independent contractor agreements.
Most influencer contracts contain exclusivity clauses. An exclusivity clause prevents an influencer from working with another brand in the same industry during the term of their contract. For example, an influencer working with Lululemon may have an exclusivity clause preventing them from promoting Alo Yoga or other activewear companies during the term of the agreement. Highly restrictive exclusivity clauses will prevent an influencer from working with brands for a period of time following the conclusion of the term of the agreement. This kind of exclusivity clause would not only prevent the above-mentioned influencer from working with other activewear brands during the term, but also for a period of time after the term, typically ranging from three months to a year.
Will the new FTC rule change exclusivity clauses in influencer contracts?
Under the new FTC rule, non-compete clauses are still valid during the contract term. Exclusivity clauses restricting influencers from collaborating with rival brands during the contract period remain valid. However, brands can no longer prevent influencers from working with other brands after their employment term has ended. This change creates the opportunity for influencers to secure more partnerships.
Influencers should pay close attention to contract durations to avoid disputes over when the agreement formally ends. Many influencer contracts will have separate terms for creation and usage. This can lead to some dispute about when the employment relationship has actually ended and the time during which the exclusivity clause is valid. Additionally, brands will likely begin to add stricter confidentiality clauses into their agreements to protect their information and intellectual property when an influencer term ends.
How will the new FTC rule impact the influencer marketing industry?
The new rule has the potential to benefit influencers with more long-term partnerships because brands will have to gain exclusivity through longer agreement terms. This would supply influencers with a more stable income and stronger relationship with the brand. It could allow influencers to contract with more brands as there would not be a post-term exclusivity. Influencers typically are able to negotiate for higher rates when exclusivity clauses are stricter, so one drawback is that influencers will lose some of this baragianing power. However, this can be offset by longer term contracts or a higher volume of partnerships.
