Non-Competes No Longer Valid

Understanding the FTC’s New Rule on Non-Compete Agreements

The Federal Trade Commission (FTC) has introduced a new rule that significant changes the landscape for non-compete agreements in the workplace. Effective September 4, 2024, most non-compete agreements with employees will no longer be enforceable.

Here’s a breakdown of what the new rule means for both employers and employees:

What is a Non-Compete Agreement?

A non-compete agreement is a contract between an employee and employer that restricts the employee from working for competitors or starting a competing business for a certain period after leaving the company. Non-competes typically are contained in employment contracts or agreements. While non-compete agreements aim to protect the employer’s business interests, but they can also limit employees’ job opportunities and mobility.

What’s Changing?

Pursuant to the new rule, employers can no longer enter into new non-compete agreements with employees. This includes senior executives—employees earning more than $151,164 per year who hold policy-making positions. However, existing non-compete agreements with these senior executives will remain valid. For all other employees, any existing non-compete agreements will become void. So the new rule is retroactive, except for C-suite, upper-level management employees.

Notice Requirements

Employers must inform both current and past employees that their non-compete agreements will not be enforced. This ensures that employees can seek or accept new job opportunities without fear of legal repercussions.

Exceptions

There are a few exceptions to the new rule:

1. Existing non-compete agreements with senior executives remain valid.

2. Non-compete agreements related to the sale of a business are still enforceable.

3. Any legal actions that arise before September 4, 2024, will not be affected by the new rule.

What the New Rule Means for Workers

Workers who previously remained with companies because of a non-compete would deprive them of other employment opportunities will no longer be restricted by the non-compete agreement. This gives employees more employment opportunities and mobility. As a consequence, employees should be in a better position to negotiate more favorable terms from their present employers.

If you or someone you know has been subject to a non-compete and you have questions about the new rule or any other aspect of your employment, please contact Shavitz Law Group at [email protected]

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