News

FTC issues Final Rule finding non-competes unenforceable

May 1, 2024

Federal Trade Commission (FTC) issued a Final Rule regarding non-compete clauses, finding that non-competes are an unfair method of competition—and therefore a violation of Section 5 of the Federal Trade Commission Act. The Rule will become effective 120 days following the rule’s publication in the Federal Register. We will share when that publication becomes available. Please note that the FTC’s announcement is not the official rule publication date.

Anyone currently subject to a non-compete agreement (of which the FTC estimates there are 30 million) no longer will be held to the restrictions contained therein the final rule’s effective date. The only exception is for senior executives, whose pre-existing non-competes can remain in effect. The final rule defines the term “senior executive” as those earning more than $151,164 annually and who are in a “policy-making position.”

Employers must provide notice to any employee with a non-compete agreement that they no longer will be enforceable. The FTC has provided language to assist employers in providing such notice.

After the effective date, the final rule will apply to all employees, including highly compensated employees. Individuals can report information regarding suspected violations of the rule to the Bureau of Competition by emailing noncompete@ftc.gov.