FTC’s Plan to Ban Non-Compete Agreements

Authored by Mark McAnulty, Carrie Roelle, Joshua Gessling, and Lee Braun

Last week, the Federal Trade Commission (FTC) enacted a Final Rule that prohibits new non-compete agreements and significantly curtails existing non-compete agreements.  Although the Rule does not specifically prohibit non-solicitation, non-disclosure and confidentiality provisions in agreements, the Final Rule’s broad definition of noncompete clauses may nevertheless deem some of these provisions unlawful.  

The broad sweep of the FTC’s action cannot be overstated.  The Final Rule prohibits new non-compete agreements with all workers, including independent contractors, across the nation. For existing non-compete agreements, the Final Rule carves out an exception for “senior executives,” which it defines as workers earning more than $151,164 annually who are in a “policy-making position.”

The Final Rule is scheduled to go into effect 120 days after its publication in the Federal Register. However, numerous legal challenges have already been filed and more are expected in the coming weeks.  If the Final Rule survives these challenges, employers are not required to formally rescind existing non-compete agreements, but they are required to notify non-senior executive workers who were subject to non-compete agreements that those agreements will not be enforced. If you have any questions regarding the Rule and/or would like to discuss your company’s existing non-compete and non-solicitation agreements, including the notice requirement, please contact any member of our Labor and Employment Law team.

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