Here’s what employers should know when adapting to FTC’s noncompete rule

The Federal Trade Commission’s (FTC) noncompete rule deals a death blow to traditional noncompete agreements. Assuming challenges are unsuccessful, the rule will go into effect in August and will negate all existing noncompete clauses, with a few exceptions. For many employers, the rule will remove a significant hedge against competition. However, nondisclosure provisions, which aren’t banned under the rule, can still provide valuable protection against unfair competition if worded carefully.

Key elements of the rule

A noncompete clause is broadly defined as:

(1) A term or condition of employment that prohibits a worker from, penalizes a worker for, or prevents a worker from:

       (i) Seeking or accepting work with a different employer when the work would begin after the conclusion of the employment that includes the term or condition; or

       (ii) Operating a business after the conclusion of the employment that includes the term or condition.