(May 2, 2024) - On Tue., April 23, 2024, the Federal Trade Commission issued a final rule banning non-compete agreements across industries nationwide subject to a few exceptions .The FTC approved the final rule in a 3-2 vote. The rule becomes effective 120 days from publication in the Federal Register.
The rule bans current and future non-compete clauses in employment agreements. Non-compete clauses typically restrict workers from leaving a job to go to a competitor within a certain geographic area for a specified period.
The rule prohibits employers from entering into new non-competes after the effective date and from enforcing non-competes with workers, including more than just traditional W-2 employees except for certain senior executives:
- Non-competes in place prior to the effective date will still be allowed for “senior executives” defined as someone in a policy-making position earning more than $151,164 annually.
Once in effect, the rule prohibits covered employers from:
- Entering into or attempting to enter into non-competes
- Enforcing or attempting to enforce
- Representing a worker is subject to a non-compete
On or before the effective date, employers will have to provide workers with notice that the non-competes will not be enforced and cannot be enforced and otherwise meet the ule’s notice requirements.
The rule does not apply to certain categories of employers. More specifically, of interest to KHA members, the rule does not apply to non-profits since the FTC does not have jurisdiction over non-profit entities. The FTC indicated it reserves the right to evaluate a non-profit entity’s status to see if it is operating as a true non-profit and test whether it may fall under its jurisdiction.
The rule also does not apply to non-compete clauses entered into as part of a bona fide sale of a business interest.
The ruling has already been challenged, including a challenge by the United States Chamber of Commerce.