The FTC estimates that 30 million people – one in five US workers – are bound by a noncompete clause in their current jobs. And for most of them, the agency asserts, such a clause restricts them from freely switching jobs, lowers wages, stifles innovation, blocks entrepreneurs from starting new businesses and undermines fair competition.

The final rule is a somewhat narrower version of the proposed rule that the agency put out for public comment in January of 2023.

It will ban for-profit employers from issuing new non competes to anyone. And – with one exception – it makes currently existing noncompete agreements unenforceable after the rule’s effective date, which is set at 120 days from the rule’s publication in the Federal Register.

The rule, however, does allow currently existing noncompete agreements for senior executives to remain in force. Senior executives are defined as workers earning more than $151,164 annually who also are in a “policy-making position.”

Areas Covered

• What is a Non-Compete Agreement
• Why is the FTC banning them
• Unenforceability of existing agreements
• Senior Executive Exemptions
• Other agreements 
• Session Highlights (Bullet points)
• What will happen now?
• When will the new regulation take effect
• What should employers do in response to the new regulation?
• Is there a notice requirement for existing agreements?
• Common Law and non-compete agreements.

Who Should Attend

Any firm that uses non-compete agreements will benefit from the explanation available in the webinar.

Why Should You Attend

The non-compete clause has been causing trouble for over 600 years. In 1414 an English court heard the case of John Dyer, an apprentice whose master had stopped him from plying his trade for six months. The judge was having none of it. “The contract is contrary to common law,” he ruled. Individuals should be free to pursue the livelihood of their choice.

That principle has been diluted in the intervening centuries most countries give businesses some leeway to use non-compete clauses, whereby workers promise not to start or join firms that go head-to-head with their ex-employer. About 20% of employees have some sort of non-compete agreement in place.

HR is primarily responsible for drafting and enforcing non-compete agreements. This webinar will help HR to focus on the future of these agreements and what to do, both now and, going forward.

Topic Background

On April 23, 2024, the Federal Trade Commission (FTC) voted to ban non-compete agreements for the vast majority of employment purposes. The new rule prohibits employers from entering into new non-compete agreements with any workers, including contractors, and requires all employers to inform any current and past workers that their non-compete agreements are unenforceable.

Employers who fail to abide by the new rule may face an adverse FTC enforcement action, prohibitive injunctions, and civil penalties up to $10,000 per individual offense. The new rule will go into effect 120 days after it is published in the Federal Register, likely at the end of August 2024, unless stayed by a court.

The compliance process involves identifying all current and past workers affected by non-compete agreements, notifying them of the unenforceability of those non-compete agreements, and removing non-compete agreements from any employment contracts looking forward.