You may recall last summer, we mentioned the future of non-competes was murky at best after the Federal Trade Commission (FTC) announced a proposed rule to ban all non-competes in January of 2023.
Yesterday, we learned the FTC voted to approve the proposed ban.
Under the new rule, existing non-competes for senior executives remain enforceable. However, employers are prohibited from entering into or enforcing new non-competes with senior executives. The final rule defines senior executives as workers earning more than $151,164 annually and in policy-making positions.
The approved rule also mandates employers provide notice to workers bound to a non-compete that the agreement will not be enforced against them in the future. The Commission included model language in the final rule to streamline compliance.
The final rule will become effective 120 days after publication in the Federal Register. Publication would likely happen soon, so look for an effective date in late August 2024.
However, the rule’s future is far from settled as several groups are expected to meet it with injunctions and legal challenges. The U.S. Chamber of Commerce, the largest pro-business lobbying group in the country, has previously said it will sue to block the rule’s implementation. Business groups believe non-compete agreements are essential for protecting proprietary information and intellectual property. Opponents also believe the new rule will likely increase labor turnover and training costs. They also question the agency’s authority to issue a retroactive, blanket ban.
What should Employers do now?
- Review existing non-competes and determine if they are enforceable under current law. Reach out to our team at Bricker Graydon if you have any questions.
- Monitor court actions. The rule will not take effect until at least mid to late August.
The future of non-competes remains quite murky, but rest assured the Labor & Employment team at Bricker Graydon is wading through the waters of non-competes and the FTC. At the moment, non-solicitation agreements and NDAs are not the types of restrictive employment agreements covered by this rule. Reach out with any questions, we’re here to help.
*Tommy Rogers is a law clerk and not licensed to practice law.
