What Does the FTC Non-Compete Ban Mean?

Yesterday, the Federal Trade Commission (FTC) voted 3-2 to ban new noncompetes with all workers. Let’s break it down:

WHAT HAPPENED: The FTC had proposed a rule in January of 2023 generally banning the use of noncompete agreements with workers. The rule received broad support. The FTC voted in support of the rule, with some changes, below.

WHO IS COVERED: All “workers”–including employees and independent contractors. Exceptions include allowing noncompetes between franchisor/franchisee; seller and buyer of a business; non-profits not under the FTC’s jurisdiction and current noncompetes with senior executives (those making more than $151,164 annually and in policy making positions) will be allowed to remain in place. New noncompetes with senior executives are not allowed under the final rule.

WHEN? The final rule would take effect 120 days after publication in the Federal Register but challenges in court have already begun.

KEY TAKEAWAYS: Until the rule takes effect, you do not need to rescind existing noncompetes unless your state law requires that. As noncompetes have been weakened by the courts and state laws, we have advised considering other options, such as non-solicitation and non-disclosure  agreements. Whether the FTC ban survives court challenges, non competes may not be the best way to protect your business in many instances. We have a comprehensive fixed fee service that preserves, secures and safeguards your business, trade secrets, proprietary information, goodwill and employees.

QUESTIONS? We can help.