Most New Non-Compete Agreements Banned by FTC

April 24, 2024

The U.S. Federal Trade Commission (FTC) approved a proposed final rule banning most new non-compete clauses in employment contracts, a rule that will affect millions of workers.

Under the FTC’s new rule, existing non-competes for most workers will no longer be enforceable after the rule’s effective date. An exception would apply to those covering senior executives.

The FTC defines the term “senior executive” as workers earning more than $151,164 annually who are in a “policy-making position.”

The rule defines a “non-compete clause” as a contractual term that blocks a worker from working for a competing employer or starting a competing business within a particular geographic area and period of time after the worker’s employment ends. It is essential to mention that the ban does not explicitly invalidate other covenants, such as nonsolicitation, nonservicing, non-recruitment, and nondisclosure clauses.

The rule goes into effect 120 days following its publication in the Federal Register.

Next Steps for Employers

“Employers concerned about the FTC rule and broader legislative and regulatory efforts to restrict the use of non-compete agreements may look to other options to protect their confidential information and business relationships,” added Melissa McDonagh, an attorney in the Boston office of Littler. “This could include nondisclosure and nonsolicitation agreements, though it’s still important to ensure that those agreements comply with local, state, and federal laws.”

Read more here: FTC Announces Rule Banning Noncompetes | Federal Trade Commission.