No More Non-Competes

Hello, and welcome to LegalEase. Today, we must talk about the new ban on non-compete agreements.

Employers – you can no longer give non-competes to all employees or contractors. There are some specific exceptions to the rules, so let’s dig in.

On April 23rd, 2024, the Federal Trade Commission voted to ban most non-compete agreements in the US. The ban applies to for-profit employers who have entered non-compete contracts with employees or independent contractors. The rule will become effective about 120 days after it is published.

There are exceptions to this rule.

  1. If you employ senior executives who earn about $151,000 and who make policy decisions, these senior executives can still receive non-competes.
  2. The ban does not apply to those who are selling a business or between a franchisor and franchisee. These groups can still enter non-compete agreements.
  3. In-term non-compete agreements are still valid. What is an in-term agreement? An in-term agreement is one that states, while you’re working for me, do not compete against me.
  4. Non-disclosure agreements and non-solicitation agreements are still valid.
  5. Finally, if there is a cause of action that arose prior to the effective date of this rule, the  cause of action stand.

Although there are some exceptions to the rule, the FTC wants to ban most non-competent agreements in this country.

What does this mean for employers?

  1. Call employment counsel. You should draft a job description for the senior executives who may meet the exception to the rule.
  2. You must give notice to your employees and contractors, and there is specific language the FTC is encouraging attorneys to use. If you give us a call, we can draft the notice for you.
  3. Finally, you must redraft your severance and employment agreements. You will need to be creative about protecting your trade secrets, client data, financial data, etc.  There are several ways we can do this for you.

Give us a call. Our link is in the bio. We will be happy to go over all this with you and make sure that you are compliant. Thank you for joining LegalEase.