FTC adopts new rule banning noncompete agreements

On April 23, the Federal Trade Commission (FTC) voted to adopt a new rule that bans noncompete agreements that prevent employees from working for competitors or starting a competing business after they end employment.

The FTC’s final rule would ban new noncompete agreements for all workers across the country.  As a result, under the new FTC rule, existing noncompete agreements for most employees will be unenforceable, although the rule provides that noncompetes may remain in effect for senior executives.

The final rule would also require companies to inform current and former employees that they will not enforce noncompetes. The FTC has included model language in its final rule that employers can use to communicate to workers that they will not enforce existing noncompete agreements.

The new FTC rule is not yet effective — the new rule will be effective in 120 days after it is published in the Federal Register. Nonetheless, it is likely that companies and organizations opposing the rule will seek an injunction to stop the new rule from being enforced.

For further information on the FTC’s new rule or any other employment matters, please contact Ryan Haas, leader of the Employment practice at Chuhak & Tecson, P.C. at rhaas@chuhak.com.

Client alert authored by Ryan A. Haas (312 855 4614), principal and general counsel.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such