24 April 2024
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The U.S. Federal Trade Commission’s recent decision to ban non-compete agreements marks a pivotal shift in employment regulations nationwide. This rule not only prohibits new agreements but also retroactively impacts existing ones. From its broad definition of “worker” to its exceptions and impending legal challenges, understanding the nuances of this rule is crucial for employers preparing for compliance. JMBM Partner Michael H. Strub, Jr. explains the implications of this landmark decision.
FTC Announces Rule Banning Non-Competes
by
Michael H. Strub, Jr., JMBM’s Litigation Group
Employers throughout the country should be aware that on April 23, 2024, the U.S. Federal Trade Commission adopted a rule that would generally prohibit non-compete provisions, which prohibit workers from accepting work in a competing business or operating a competing business. Specifically, the rule prohibits employers from entering into new non-compete provisions and acts retroactively to prohibit employers from enforcing existing ones.
The rule defines “worker” broadly, and includes, for example, independent contractors and unpaid workers. The rule includes an exception in connection with the bona fide sale of a business and allows existing lawsuits to enforce non-compete clauses to continue. The rule also permits enforcement of existing non-compete provisions with senior executives—policy makers whose total compensation is at least $151,164 when annualized—but prohibits new ones.
The rule also requires employers to give notice of the new rule, so there will be yet another piece of paper that must be tacked to the cork board in the company kitchen. CONTINUE READING →