BREAKING NEWS: FTC Bans Non-Compete Agreements Nationwide

The Federal Trade Commission (FTC) issued a Final Rule this week to ban non-compete agreements, marking a significant shift in employment law nationwide.  The Final Rule is not an absolute ban, however the exceptions are narrow.  Some key takeaways from the Final Rule are:

• The Ban does away with all new post-employment non-compete agreements between employers and employees, regardless of industry or type of worker.
• The Ban allows existing post-employment non-compete agreements to remain in effect only for senior executives. A “senior executive” is defined as an employee “earning more than $151,164 annually who [is] in a policy-making position.”
• The Final Rule calls for notice to employees that previously executed post-employment non-compete agreements are no longer enforceable.
• The Ban creates an exception for the sale of a business, regardless of the ownership percentage.
• The Ban does not apply to franchisee/franchisor contracts (though the Ban does apply to employees working for a franchisee or franchisor).

The FTC rule isn’t set to go into effect until 120 days from the day it is published in the Federal Register, so likely not before September, 2024.  Moreover, less than 24 hours after the FTC issued the final rule, the US Chamber of Commerce filed a lawsuit against the agency in federal court in the Eastern District of Texas.  As such, the final impact of the Rule is yet to be determined.

Ultimately, employers may need to reassess their employment practices and consider alternative ways to protect their interests without resorting to non-compete agreements.  Meanwhile, employees may find themselves with greater freedom in their career paths. As this issue continues to evolve, both employers and employees should stay informed about their rights and responsibilities under the new regulatory landscape.

Jeff Burke is an attorney at MacElree Harvey, Ltd., working in the firm’s Employment and Litigation practice groups. Jeff counsels businesses and individuals on employment practices and policies, executive compensation, employee hiring and separation issues, non-competition and other restrictive covenants, wage and hour disputes, and other employment-related matters. Jeff represents businesses and individuals in employment litigation such as employment contract disputes, workforce classification audits, and discrimination claims based upon age, sex, race, religion, disability, sexual harassment, and hostile work environment.  Jeff also practices in commercial litigation as well as counsels business on commercial contract matters.