The Federal Trade Commission (FTC) voted this week to issue a final rule banning non-compete agreements in all but a few narrow exceptional circumstances. A link to the FTC’s final rule can be found here.

Some important takeaways are as follows:
– Legal challenges to this rule have already been raised, so the binding nature of this final rule is currently unknown.
– The new rule is set to take effect in four (4) months – 120 days after publication in the Federal Register.
– The noncompete ban is subject to several important exceptions, namely (1) existing agreements with senior executives earning more than $151,164; (2) restrictions placed on a person in the bona fide sale of a business; and (3) franchisor/franchisee relationships.
– Employers do not need to formally rescind their existing noncompete agreements but are required to communicate to their workers bound by an existing noncompete agreement that the agreement will not be enforced against them in the future. Model language satisfying this notice requirement has been provided by the FTC.
– Once the rule is effective, employees are invited to report information about a suspected violation of the rule to
– The rule does not bar the continued use of reasonable restrictions concerning confidentiality/trade secrets (NDAs) and solicitation of customers and employees.
– This federal rule preempts any State laws that conflict with the final rule.

Contact any employment attorneys at OGC Solutions, should you wish to explore the effect this new rule may have on your business and personnel.



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