On April 23, 2024, the Federal Trade Commission (FTC) voted to issue a final rule that would prohibit employers from entering into or enforcing noncompete clauses with most employees. The final rule was published in the Federal Register on May 7, 2024, and is scheduled to take effect 120 days after such date on Sept. 4, 2024.
Subject to very limited exceptions, the final rule provides that:
- The use of noncompete clauses will be banned as of the effective date;
- Any existing noncompete clauses (other than those entered into with senior executives) will be invalidated;
- Employers must notify all employees (other than senior executives whose existing noncompete agreements will remain enforceable) that their existing noncompete agreements will not be enforced.
The FTC stated that it aims to promote competition by protecting the freedom of workers to change jobs, increasing innovation, and fostering new business formation.
Action Steps – Employers that use noncompete or similar protective clauses should familiarize themselves with the rule’s requirements and take steps now to prepare for its effective date. Employers should note, however, that at least three lawsuits (including one brought by the U.S. Chamber of Commerce) seeking to block the final rule have already been filed, so employers should monitor for additional legal challenges and prepare for potential uncertainty.
We created a Compliance Bulletin that provides an overview of the key provisions of the final rule and steps employers may take to prepare for the FTC’s ban on noncompete clauses.
Click the following link to read the bulletin: Preparing for the FTC’s Noncompete Ban
Check out our podcast on this topic where Rob, Scott, and Jason unpack the FTC’s ban on non-compete agreements: Navigating the New Non-Compete Ban
