FTC Bans Non-Competes
On February 23, 2024, the Federal Trade Commission (“FTC”) voted three to two to issue the final rule it proposed over a year ago to ban non-competes for most workers in America. Furthermore, the regulations require that companies with active non-competes inform their workers that have them that they are void. The rule exempts those involved in the sale of a business and senior executives which are individuals who are in policy-making positions and receive at least $151,164 in annual compensation. Workers are broadly defined, though, to include employees, independent contractors, volunteers, interns and others “who work or previously worked, whether paid or unpaid, without regard to the worker’s title or status.”
The rule that has been voted in will take effect at 120 days after it is published in the Federal Register. However, the Chamber of Commerce has already filed suit seeking to fight the rule in court. Implementation of the rule may be stayed through this litigation process.
Three states already ban non-competes: California, North Dakota and Oklahoma. Other states have placed limitations on non-competes in recent years, including Indiana, with respect to physician agreements.
Further, the National Labor Relations Board has come out against non-competes for hourly workers as being violations of their rights under Section 7 of the National Labor Relations Act.
In light of these myriad of headwinds, it is advisable for employers to be judicious in implementing non-compete agreements limiting them to company ownership, high-level employees or crafting alternative restrictive covenants like confidentiality agreements and non-solicitation provisions.
Given the changing landscape of restrictive covenants – specifically non-competes – it is advisable you talk to experienced counsel in the locality for which you seek those restrictions.
