FTC Bans Noncompetes in the Workforce
The Federal Trade Commission (FTC) has issued a sweeping new rule that fundamentally alters the landscape of noncompete agreements in the workforce. The proposed rule represents a seismic shift in the legal landscape surrounding noncompetes, particularly in terms of how existing agreements will be handled and the parameters for future agreements.
Specifically, the rule stipulates that the vast majority of workers will see their current noncompetes rendered unenforceable. Existing noncompetes for senior executives—defined as individuals earning over $151,164 annually and holding policy-making roles—will retain their enforceability.
The FTC's final rule also prohibits the creation, or reinforcement, of any new noncompete agreements, even if they involve senior executives.
The rule includes an exception that allows noncompetes between the seller and buyer of a business.
When the rule becomes effective, employers will be obligated to communicate this change to affected employees. The final rule will become effective 120 days after publication in the Federal Register, but is expected to face legal challenges which may delay the effective date.
The FRC’s final rule underscores the importance of staying informed and proactive in navigating these evolving legal landscapes. Employers have several alternatives to noncompetes that still enable them to protect their proprietary information such as non-disclosure and confidentiality agreements. Contact us to schedule an appointment with one of our employment law or intellectual property law attorneys to review your current employment contracts and to learn how to protect your trade secrets.
