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On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule banning noncompetes nationwide on the basis that they are an unfair method of competition. This rule takes effect 120 days after it is published in the Federal Register, but it is already raising questions for employers and employees.
Approximately 18% of US workers are covered by noncompetes, which control their ability to seek work with competitors after leaving their employer, either by choice or through termination. Once the rule takes effect, it will bar employers from entering into new noncompetes with workers and nullify noncompete agreements for any worker who is not a “Senior Executive.” Senior Executives are defined as employees earning more than $151,164 per year and who are in policy-making positions. The rule allows existing noncompetes for Senior Executives to remain in effect, but prevents employers from entering into new noncompetes with any employee, including senior executives.
This is a major change, and there will undoubtedly be extensive legal action against the rule. For now, employees and employers should take note as we continue to monitor the rule as it goes into effect.
