Recently, the Federal Trade Commission (“FTC”) approved a final rule voiding and banning essentially all non-compete agreements entered into between employers and their employees in the United States. Here’s what employers need to know about this significant development. The final rule is scheduled to take effect on September 4, 2024.
Scope of the Ban
The final rule comprehensively bans employers from entering into non-compete agreements with all workers in the United States.
Retroactive Provisions
The final rule contains retroactive provisions that void existing non-compete agreements, except for those with “senior executives.”
Senior Executive Exception
“Senior executives” are defined as workers who earn more than $151,164 annually and are in “policy-making” positions. Only existing non-competes with senior executives are exempt from the voiding provisions of the rule. However, after the final rule becomes effective, employers cannot enter into non-competes with senior executives.
Legal Challenges
Legal challenges are anticipated, with the United States Chamber of Commerce already filing a lawsuit against the FTC. The lawsuit argues that the FTC lacks the legal authority to adopt the final rule and that the rule is unlawful.
What Employers Need to Do:
Costello, Cooney & Fearon, PLLC will continue to monitor the implementation of the final rule and any legal challenges. Employers should be generally aware of the contents of the final rule in the event the rule goes into effect. Should the final rule go into effect, there may be penalties for employers who continue to enforce non-compete agreements or attempt to negotiate non-compete agreements with new employees.
Conclusion:
The banning of non-compete agreements would be a major change for employers and employees in the United States. Stay informed about its progress and potential legal challenges. For more information, visit the FTC’s website.
