| FTC Bans Most New Non-Compete Agreements Nationwide |
 Rule makes all existing non-compete agreements except for those covering senior executives unenforceable. The U.S. Federal Trade Commission (FTC) today approved a final rule banning most new noncompete clauses in employment contracts, which may affecting millions of workers. The rule also makes all existing noncompete agreements except for those covering senior executives unenforceable and requires employers provide notice to current and former workers that their noncompete clauses are no longer in effect. The FTC defines the term “senior executive” to refer to workers earning more than $151,164 annually who are in a “policy-making position.” The rule goes into effect 120 days following its publication in the Federal Register. The rule defines “noncompete clause” to mean a contractual term that blocks a worker from working for a competing employer, or starting a competing business, within a certain geographic area and period of time after the worker’s employment ends. The rule also applies in some cases to agreements that require employees to pay back the employer for training costs if the worker’s employment terminates within a specified time period. All current state laws limiting non-competes would be preempted unless they provide greater worker protection than the FTC rule. The final rule does not explicitly invalidate other covenants, such as non-solicitation, non-servicing, non-recruitment, and nondisclosure clauses. Red Flag Tips There will likely be a move for a nationwide injunction stopping the final rule from taking effect while litigation is pending. -Employers are advised to revisit their restrictive covenants to ensure compliance, consider whether business interests can be protected with properly tailored non-solicitation or confidentiality clauses and limit trade secret access only to those who need it. -Employers should discuss the ramifications of the rule with their counsel. Employers may need to look to other options to protect their confidential information and business relationships. This could include nondisclosure and non-solicitation agreements, though it’s still important to ensure that those agreements comply with local, state and federal laws. For additional information, please call our office at 714.799.1115 |
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