The Federal Trade Commission issued a rule in late April, 2024, that provides that it is an unfair method of competition for employers to enter into non-competition agreements with workers.
As to non-competition agreements existing as of time this final rule becomes effective, for senior executives such existing non-competition agreements can remain in force. Existing non-competition agreements with workers other than senior executives are not enforceable after the effective date.
A "senior executive" is a worker whose annualized compensation is at least $151,164. (16 CFR s. 910.1)
For each existing non-compete clause that will become unenforeceable, the person who entered into the non-compete clause with the worker must provide clear and conspicuous notice to the worker by the final rule's effective date that the worker's non-compete clause will not be, and cannot legally be, enforced against the worker. (16 CFR s. 910.2(b))
The above requirements do not apply:
to a non-compete clause that is entered into by a person pursuant to a bona fide sale of a business entity, of the person's ownership interest in a business entity, or of all or substantially all of a business entity's operating assets; (16 CFR s. 910.3(a))
where a cause of action related to a non-compete clause accrued prior to the effective date of this regulation; or (16 CFR s. 910.3(b))
to enforcing or attempting to enforce a non-compete clause or to make representations about a non-compete clause where a person has a good-faith basis to believe that this regulation is inapplicable. (16 CFR s. 910.3(c))
This final rule will become effective 120 days after publication in the Federal Register.
Once the final rule is effective, persons can report information on a suspected violation of the rule to the Bureau of Competition by emailing to: noncompete@ftc.gov