FTC issues a nationwide ban on noncompetes

Following the trend of many states that have severely limited or prohibited employee noncompetes, the FTC announced in April a final rule prohibiting noncompete provisions in agreements with workers. The FTC rule, which will become effective on September 4, 2024 (assuming it withstands legal challenges) will, if nothing else, bring uniformity and clarity to the now-fragmented national landscape of noncompete regulation.

The rule prohibits employers from entering into, attempting to enter into, or maintaining noncompete clauses with any workers (whether employees or contractors) and requires notice to certain workers that their noncompetes are now unenforceable. With respect to noncompete clauses entered into prior to the effective date, enforceability depends on the seniority level of the employee – senior executive noncompetes, narrowly defined, are grandfathered.

Although legal challenges are pending, it is crucial for businesses to prepare for compliance by reviewing and adjusting their current employee agreements, assessing all outstanding noncompete agreements, and preparing notifications to the extent required by the rule.

If you need help understanding how this rule applies to your business or any other guidance on next steps, please do not hesitate to contact us.

Categorised as: Employment Law, Legal Issues, Regulatory alert