April 23rd 2024. The Federal Trade Commission, or FTC, issued its final rule prohibiting all non-compete agreements for all employees at all levels, with only extremely limited exceptions…
So what does this mean?
Banning non-competes should promote competition, protect the fundamental freedom of workers to change jobs, increase innovation, and foster new business formation.
An estimated 30 million workers – 18% of US workers – are subject to a noncompete, an often exploitive practice imposing contractual conditions that restrict workers from taking a new job or starting a business in the same field.
Existing non-competes may remain in place for senior executives* but employers will not be able to enter into, or attempt to enforce, any new non-competes - even if the employee is a senior executive. Employers are also liable to provide employees with notice that their existing non-compete can no longer be forced against them.
This should mean that, instead of imposing a non-compete, employers will look to retain employees against competing companies by improving wages and work conditions.
The final rule will become effective 120 days after publication in the Federal Register. Non-Disclosure Agreements (NDAs), TRAPs (Training Repayment Agreements Provision) and non-solicitation agreements are still lawful, provided they do not function effectively as non-compete clauses.
*The final rule defines senior executives as workers earning more than $151,164 annually and who are in policy-making positions.
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