In April 2024, the Federal Trade Commission voted to adopt a new rule that limits noncompete clauses/agreements (the rule). The rule is slated to go into effect on Sept. 4, 2024. This article summarizes the rule, some pending challenges to the rule, and strategies that businesses should consider implementing today to protect their interests.
What Does the Rule Cover?
Beginning on Sept. 4, the rule will generally prohibit employers from entering new noncompete clauses with workers. The rule treats existing noncompete agreements differently depending on whether the worker is a “senior executive,” which includes workers who (1) earn more than $151,164 and (2) are in a “policy-making” position. For these, existing noncompete clauses remain valid and enforceable. For all other workers, existing noncompete clauses will no longer be enforceable. Additionally, employers must inform such other workers that any existing noncompete clauses are no longer enforceable.
