FTC Final Rule Banning Most Worker Noncompete Agreements

The Federal Trade Commission (FTC) last week issued its long-anticipated final rule generally banning noncompete agreements for workers (including employees and independent contractors) nationwide. 

What should employers do right now? 

1. 1. Regarding federal law, we anticipate more developments in the coming months. The final FTC rule is scheduled to go into effect in or around September 2024. But the effective date may be delayed or enjoined—indeed, as expected, lawsuits challenging the rule have already been filed, including by the U.S. Chamber of Commerce.
   2. Regarding state laws, employers should be mindful of more protective statutes already on the books in some states. California leads the way with its very employee-friendly prohibitions against most non-compete provisions that were expanded even further earlier this year. (If your company has not taken steps to comply with the new laws that took effect January 1 of this year, see our 2024 update or contact an Allen Matkins employment attorney.)

The current final version of the FTC rule has a narrow exception permitting non-compete provisions in a sale-of-business situation (California also has a sale-of-business exception). While the FTC rule also has an exception for certain highly paid executives, this will not alter state laws, like California’s, that do not recognize such an exception. 

If you have further questions, feel free to contact the employment attorneys at Allen Matkins, who are very experienced in advising employers regarding non-compete issues, as well as successfully litigating such issues.