On April 23rd, the Federal Trade Commission (FTC) announced a final rule that will ban non-competes for all employees (including retroactively for all but “Senior Executives”) of for-profit employers. The rule, if implemented, will represent a major shift in employee labor relations and is intended to increase competitiveness in the labor market and give employees more freedom. The new rule rests on the argument that non-competes are an unfair method of competition and, thus, a violation of Section 5 of the Federal Trade Commission Act. However, the final rule faced an immediate challenge from the US Chamber of Commerce (a powerful organization of US business interests), who sued the FTC on April 24, 2024, in the US District Court in Texas to block the implementation of the rule.
It is important to note that the new rule will only go into effect 120 days after it has been published in the Federal Register. However, this is likely to be further delayed by the legal challenges to the rule. If the rule becomes effective, it will apply retroactively, thus rendering existing non-competes for all employees (past and current) except “senior executives” unenforceable. The rule defines senior executives as “employees in a ‘policy-making’ position who make at least $151,164”. Employers are required to send out notices to all past and present employees who have signed non-compete agreements notifying them that the agreement is unenforceable prior to the effective date of the rule.
The new rule is a major increase in worker rights, which will facilitate millions of Americans to access the freedom to change jobs, start new businesses, or innovate without fear of interference from former or current employers. If you are an employee who has questions about a non-compete clause, Gilbert Employment Law may be able to help you.
