FTC Bans Non-Compete Agreements

April 23, 2024

On Tuesday, April 23, 2024, the Federal Trade Commission (“FTC”) voted to implement a new rule that would ban a majority of non-compete provisions for most American workers. This rule will make most previous non-compete provisions null and void and will restrict businesses from being able to enter into non-compete agreements or add non-compete provisions to various agreements in the future. This new rule will affect employees, independent contractors, interns, volunteers, apprentices, and sole proprietors of businesses throughout the United States. The only class of people that this new rule will not cover is those who would be classified as “senior executives.” Senior Executives are those who are in policy-making positions for businesses (such as CEO, president, etc.) and have a total annual compensation of $151,164.00 per year. However, this new rule would prevent businesses from entering into new non-compete agreements, even for senior executives. The final rule banning non-compete provisions is slated to go into effect 120 days after it is published in the Federal Register.

The U.S. Chamber of Commerce and others have already filed lawsuits in the Eastern District of Texas and the Northern District of Texas, contending that the FTC lacks the necessary authority to issue such a large and sweeping decision. The United States Supreme Court is also set to decide on two cases that many believe could bear directly on the FTC’s lawsuits because they deal with the long-standing precedent known as “Chevron Deference,” which sets the framework for evaluating agency action.

If you are a business, business owner, or any of the affected parties with a non-compete agreement, you should know that as a part of the rule, businesses are required to inform the affected parties in writing via letter, email, or text message, that their non-competes have been rescinded. Businesses are required to send notice to the affected parties no later than the rule’s effective date. Additionally, it’s important to know that non-disclosure, confidentiality, and non-solicitation provisions, even contained within non-compete agreements, may be permissible as long as they are not so broad as to function as a non-compete.

If you have any questions about the FTC ban, contact RR&A. We would happily assist you with non-disclosure, confidentiality, or non-compete agreements.

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FTC Bans Non-Compete Agreements Update
June 28,2024

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Tannon Symm

Tannon is a Junior Associate at R. Reese & Associates and part of the Commercial Contracts, Transactions, Corporate and Land and Title teams. To learn more about Tannon, visit his attorney page.

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