FTC’s Final Rule Banning Noncompete Agreements: What You Need to Know

On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule, with a 3-2 decision, which will ban noncompete agreements in the United States. The FTC touted the final rule as one necessary to promote competition, to protect the freedom of workers to change jobs and to foster new business formation. The rule was proposed in January 2023 by the FTC, which received over 26,000 comments during the 90-day public comment period, the large majority of which were in support of the proposed rule. The final rule will become effective in 120 days. 

Under the final rule, employers are obligated to notify workers that existing noncompete agreements will not be enforced. The rule includes model language that employers may use to communicate this message to their workers. 

The only exception pertains to senior executives, who are defined by the final rule as workers who earn more than $151,164.00 annually and who are in policy-making positions within their organizations. Any existing noncompete agreement between an organization and a senior executive will still be enforceable. However, the new rule prohibits employers from entering into new noncompete agreements with senior executives.

In response, the U.S. Chamber of Commerce filed a lawsuit on April 24, 2024, challenging the legality of the FTC’s final rule, commenting that the proposed ban was “not only unlawful, but also a blatant power grab that will undermine American businesses’ ability to remain competitive.”

For additional information regarding the final rule and the impact it may have on your organization, please contact the Employment Law Group at Marshall Dennehey. 

^{Legal Updates for Employment Law – April 25, 2024, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note to tamontemuro@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved.}