On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule that would ban non-compete agreements in the employment setting, deeming non-competes as a violation of Section 5 of the FTC Act.
As it stands, the rule would ban the creation of any new non-compete agreements for all workers and would limit existing non-compete agreements to senior executives only (a “senior executive” being defined as someone earning over $151,164 annually who is in a “policy-making position”). Under the new rule, companies would also have to inform non-senior executives with whom there are existing non-compete agreements that they will not be enforcing these agreements.
However, various lawsuits have been filed challenging the new rule, including one by the tax services firm Ryan, LLC in the Northern District of Texas in which the U.S. Chamber of Commerce has intervened against the FTC rule. We will know in early July if the rule is going to be stayed, which would subsequently delay the implementation of the rule. If it is not stayed, then the rule banning non-compete agreements will be effective September 4, 2024. Below is the current litigation timeline for the Ryan, LLC lawsuit in the Northern District of Texas:
At present, employers should wait to see what happens with the litigation before making any sweeping changes to their non-compete agreements. As always, it is important to check state law to ensure your agreement is in compliance.
If you have any further questions about non-compete agreements, please contact a member of Barton’s Labor & Employment Group.