Breaking News: FTC Bans Use of Non-Competes in Essentially All Employment Contracts
Today, April 23,2024, the Federal Trade Commission (FTC) announced its long-awaited rule banning the use of non-competes in employment contracts. (https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes). The FTC first proposed this rule in January 2023. At that time, the proposed rule would have been a complete ban on any non-compete agreement. The final rule published today excluded “senior executives,” which it defined as people earning $151,164 annually and who are in policy-making positions.
Know the Law: Provision Only Applies to Noncompetes, Not Other Restrictive Covenants
Outside of senior executives, this rule is a complete ban on the use and enforcement of non-competes. This includes currently existing non-compete agreements. While companies are not required to formally rescind those provisions, they are required to provide notice to workers other than senior executives who are bound by an existing noncompete that the company will not be enforcing any non-compete agreements against them.
The provision only applies to non-compete agreements, which are defined as, “terms and conditions that expressly prohibit a worker from seeking or accepting other work or starting a business after their employment ends.” Other restrictive covenants, such as non-disclosure or trade secret agreements, non-solicitation agreements, and training reimbursement agreements are unaffected by this rule unless they functionally serve as a non-compete.
Understanding the Impact of Banning Noncompetes
According to the FTC, “Noncompetes are a widespread and often exploitative practice imposing contractual conditions that prevent workers from taking a new job or starting a new business.” The Commission estimates that the final rule will lead to more than 8,500 additional new businesses created each year, higher earnings for workers, and lower health care costs. The FTC has provided the following infographic that summarizes the expected impact:
https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
While this rule is a win for worker mobility, it is unclear whether it will go into effect. The rule does not become effective for 120 days. Business interests, including the U.S. Chamber of Commerce, have already promised to challenge the legality of this rule. It is likely those legal challenges will put a hold on this rule at a minimum.
Get Help From a Non-Compete Agreement Lawyer in Florida
If you are an employee who is currently bound by a non-compete agreement, you should still seek legal advice on whether your specific agreement is valid and enforceable. This news does not automatically relieve you from those restrictions.
If you are an employer who requires your workers to sign non-compete agreements, you should still consider contingencies for how you will respond to the rule potentially going into effect in 120 days. It is recommended that you speak to qualified legal counsel about how your workforce can be impacted. Contact an experienced Florida employment lawyer to set up a confidential, comprehensive review of your workplace.
