FTC bans noncompetes? Not so fast...

On April 23, 2024, the Federal Trade Commission (FTC) voted to issue a final rule banning nearly all noncompete agreements in the employment context. Although the rule is scheduled to go into effect 120 days after it’s published in the Federal Register, it already faces legal challenges in the courts, which may delay its effective date, or invalidate the rule altogether.

Key takeaways from FTC’s final rule

Here’s a look at what the new final rule actually does:

• Virtually all existing and future noncompete agreements in the employment context will be invalidated.
• Noncompete agreements with “senior executives” that were signed before the rule takes effect will be spared through a grandfather clause, provided the person works in a “policy-making position” and earns at least $151,164 per year through salary and benefits.
• The final rule applies to noncompete agreements with employees and independent contractors.
• Once the final rule goes into effect, employers must provide notice to all workers with noncompete agreements (other than qualifying “senior executives”) confirming that their existing noncompete agreements are unenforceable.

Here’s a look at what the new final rule doesn’t do: