FTC says noncompetes are over, mostly, and now courts will decide

The general rule on noncompete clauses in the state of Nevada has been unchanged for some time. Unless there’s a public policy reason to declare them void, noncompetes are generally enforceable as long as they are reasonable in time and scope and narrowly tailored to protect the employer’s legitimate business interest without imposing an undue hardship on the affected employee. That rule, however, may have just ended—for the most part.

FTC vote

On April 23, 2024, the U.S. Federal Trade Commission (FTC) voted 3-2 to approve a final rule outlawing most noncompetes nationwide. Specifically, the final FTC rule states that effective August 2024, businesses may not enter into noncompetes with employees other than senior executives, nor may businesses enforce existing noncompetes against such employees. When the employee at issue is a senior executive, existing noncompetes can remain in effect, but no new noncompetes can be entered into as of August 2024.

Certain exceptions exist. For example, noncompetes are still allowed when entered into in connection with the sale of a business. And for businesses already in litigation with their former employees, the FTC announced its new rule isn’t intended to take away claims for damages that accrued before August 2024.

Changes in Nevada

The FTC’s new regulations, once they go into effect, will effectively preempt and replace existing Nevada state law on the subject, which means Nevada’s existing rule is effectively out the proverbial window for most employees.