Federal Trade Commission Bans Most Non-Competes

Key takeaways:

1. Generally, non-competes will be prohibited effective September 4, 2024.
2. This is a new far-reaching rule that could impact YOU.
3. Prior to September 4, 2024, employers must notify all employees that have a non-compete in place that it will no longer be enforceable (unless an exception applies).

Summary:

As of September 4, 2024, employers will no longer be able to enforce non-competes under the new rule passed by the FTC, subject to some exceptions.  If documents such as non-disclosure agreements or non-solicitation agreements are determined to have the effect of a non-compete, they can be voided.

Two cases in which an employer could potentially still enforce a non-compete are as follows: 

1. Employers engage in a non-compete with a senior executive prior to September 4, 2024. A senior executive is an employee in a policy making position earning more than $151,164 per year.  Please note, this exception only applies to senior executive non-competes entered into BEFORE September 4, 2024.

2. In connection with a bona-fide sale of a business, personal interest in a business, or a sale of all or substantially all of the business entity’s operating assets. There is no ownership percentage threshold requirement to trigger this exception.

Employers must provide written notice in person, via mail, or email to current employees with non competes informing them that their non-compete will be no longer be valid after September 4, 2024. The complete list of requirements for the notice and model language can be found in the rule.

Litigation on this new rule is already pending and more is expected in the near future.  But for now, it will be the law as it stands.

For more details, please see the link below:

https://ogletree.com/insights-resources/blog-posts/ftc-adopts-final-rule-banning-employers-from-entering-non-competes/