FTC Set to Ban Non-Competes

On April 23, 2024, the U.S. Federal Trade Commission (the “FTC”) adopted a final rule that effectively bans non-compete clauses in employment contracts (the “Rule”). For workers other than “senior executives”, the ban is effective as of the effective date of the Rule, about four months after publication, and not only prohibits such clauses but also prohibits the enforcement of such clauses. For “senior executives,” the Rule bans clauses from the effective date and enforcement of clauses after that date; pre-existing clauses – presumably those entered before the effective date – can still be enforced. “Senior executive” is defined as meaning a worker who: (1) was in a policy-making position; and (2) received from a person for the employment total annual (or annualized if employed for, or departed in, less than a year) compensation of $151,164. For covered employees, the FTC requires a notice be given to them and provides model language. The Rule seems likely to be challenged in courts but unless stayed goes into effect towards the end of August.