A Federal Trade Commission (FTC) rule banning non-compete clauses is set to go into effect on September 4, 2024. Under the rule, non-competes are broadly defined as any arrangement that prohibits, penalizes, or functionally prevents a worker from getting a new job or starting a business after leaving their employment, even if the agreements are not labelled as non-competes. In short, the rule bans employers from entering into non-competes with workers covered by the rule. It also imposes an obligation on businesses to notify former employees and contractors with whom they previously entered into non-competes, that these agreements are now unenforceable. There is an exception for agreements with senior executives related to the bona fide sale of a business and for situations where a dispute arose about whether the non-compete was breached before the effective date of this rule.
To help businesses understand this rule and how to comply with it, the FTC has prepared a business and small entity compliance guide. The guide contains step-by-step instructions for complying with the rule, along with FAQs further explaining the rule. Additionally, the FTC recorded a compliance webinar for businesses on May 14th. The video and transcript are available here.
You can read more about the final rule on the FTC website and in this fact sheet. The text of the rule and model notices regarding compliance with the rule’s notice requirement are available on the FTC website. You can also contact the FTC at noncompete@ftc.gov if you have further questions.
MCAA Lobbying Firm, Longbow Public Policy Group prepared a summary of the FTC’s final rule following its publication. The summary offers further guidance and answers questions about industry-specific matters, such as the application of this rule to training repayment agreements and the jurisdictional limits that prevent application of this rule to bona fide non-profit entities, such as 501(c)(3) training funds.
