The FTC just published its final rule banning non-competes in the United States. The Rule, which will go into effect in 120 days (absent an injunction), makes it an unfair method of competition to:
- Enter or attempt to enter a non-compete
- Enforce or attempt to enforce a non-compete
- Represent a worker is subject to a non-compete clause.
The Final Rule revises the scope of non-compete to include forfeiture provisions but to exclude (in most cases) non-solicitation and non-disclosure provisions. The Final Rule also requires notice to each employee subject to a non-compete covered by the Rule’s prohibition on enforcement affirmatively stating the non-compete cannot and will not be enforced.
Notwithstanding its otherwise broad terms, the Final Rule does allow certain non-competes and causes of action, however:
- Non-competes entered into in connection with a sale of a business;
- The enforcement of existing non-competes with senior executives (those who make policy and are paid at least $151,164 annualized);
- Causes of action that accrued prior to the effective date.
One or more suits to enjoin the proposed rule are expected to be filed on April 24, 2024.
FTC Press Release – https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
FTC Final Rule – https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf
