FTC Announces Rule to Ban Noncompete Agreements

Yesterday, the Federal Trade Commission (“FTC”) voted on a final ruling to ban nearly all noncompete agreements, which would go into effect later this year. With an exception for existing noncompetes signed by senior executives—workers earning more than $151,164 annually in policy-making positions—as well as noncompete agreements entered into in connection with the bona fide sale of a business entity, employers would be prohibited from enforcing all other noncompete agreements. According to the FTC, this policy change has the potential to increase wages by nearly $300 billion per year by allowing employees to change jobs freely. However, the U.S. Chamber of Commerce strongly opposes the ban, stating noncompete agreements are vital to companies by allowing for the protection of trade secrets and employees, providing employers with increased incentive to invest in workforce development and training. Under the final rule, employers will have to provide notice to workers bound to an existing noncompete that the agreement will not be enforced against them in the future.

Legal challenges to the rule are expected but, should the ruling go into effect, companies will need to look to alternative measures to protect proprietary information. Such measures include non-disclosure agreements (NDAs) and trade secret law.

ThompsonMcMullan attorneys can work with you to ensure compliance with the evolving landscape around noncompete agreements. For assistance with updating policies, issuing notices, and reviewing existing and future employment agreements, please do not hesitate to contact a member of our Employment Law team.