This week, the Federal Trade Commission (FTC) issued a final rule banning the use of noncompetition agreements for almost all workers, based on the premise that such agreements are an unfair method of competition and violate Section 5 of the FTC Act.
Under the new rule, existing noncompetition agreements can remain in force for senior executives, but employers are banned from entering into or attempting to enforce any new noncompetition agreements—even for senior executives, who are defined as workers in policy-making positions earning more than $151,164 annually.
The rule requires employers to provide notice to workers (other than senior executives) who are bound by an existing noncompetition agreement they will not be enforcing any noncompetition agreements against them.
The new rule is set to take effect 120 days after publication in the Federal Register. However, legal challenges to this unprecedented rule are already being filed and enforcement of the rule will likely be delayed beyond the 120 day period as these lawsuits make their way through the courts.
Next Steps
Dunn Carney’s Employment Law Team will track these developments closely. For questions about the new rule and/or use of other types of agreements, such as Nondisclosure/Confidentiality and/or Nonsolicitation Agreements, contact a member of the Employment Law Team.
