FTC Votes to Ban Most Non-Compete Agreements

The Federal Trade Commission (FTC) recently voted 3-2 to issue a proposed rule that would effectively ban most non-compete agreements between employers and employees. This rule, if finalized, would have a significant impact on employers and staff across the country.

Key Points of the Proposed Rule

  1. Bans current non-compete clauses across the US, except for senior executives “earning more than $151,164 annually who are in a policy-making position.”
  2. Bans employers from entering into new non-compete agreements with nearly all workers.
  3. Non-solicitation, no-hire and no-business clauses may be unenforceable, but not an outright ban. It’s a fact-specific inquiry.
  4. Exceptions exist for franchises and the sale of business.

 

When is it official?

The rule will be effective 120 days after publication in the Federal Register.  Additionally, the US Chamber of Commerce has already announced plans to challenge the rule in court. This may delay the implementation.

 

Penalties

Companies that violate this rule may be subject to civil monetary penalties.

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