On April 23rd, 2024, the Federal Trade Commission (FTC) issued a final rule to promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.
Here is what employers should know:
Final FTC Non-Compete Rule
The Federal Trade Commission has issued a final ruling banning non-compete agreements for all employees and independent contractors.
This new rule focuses on providing more opportunities for workers around the country when it comes to changing jobs, and furthering their careers.
Update 08.20.24: A recent court ruling has paused the enforcement of this rule.
Impact on Employers
Under the new rule, employers will be prohibited from entering into new non-compete agreement with any employee, including senior executives, or from representing to any employee that they are subject to a non-compete agreement.
Employers will need to notify their employees that their existing non-compete agreements are unenforceable before the rule takes effect. Current non-compete agreements with senior executives will not be affected by this ruling, according to the Federal Trade Commission report.
This final rule was set to go into effect on September 4th, 2024. However, a recent order from a district court has stopped the FTC from enforcing this rule.
Has the FTC Non-Compete Rule Been Repealed?
On August 20th, 2024, a district court issued an order preventing the FTC from enforcing the rule as of the anticipated date of September 4th. As such, employers do not need to comply with this new legislation for the time being.
However, the FTC has appealed that decision and is currently waiting on a final decision regarding the new rule.
Employers should note that the district court’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.
Get Help with HR Compliance
Human resources departments have a new challenge put before them in regards to this new rule.
While a decision on whether or not to allow this new rule to go into effect has yet to be made, HR professionals should prepare just in case, due to the overwhelming public support of the proposed legislation.
If you are unsure of where to begin, or are encountering other challenges related to HR, you may want to consider reaching out to an HR Service company for help.
To learn more about the HR services available through EBC HCM, contact us today.
