The Federal Trade Commission (FTC) has issued a new rule regarding non-compete clauses. It has and will have significant implications for employers and companies. Here are the high-level provisions of this new rule:
**Ban on New Non-Competes**: Employers cannot enter into, attempt to enter into, or enforce non-compete clauses with workers. This includes employees and certain contractors after the rule’s effective date.
**Existing Non-Competes with Non-Senior Executives**: Non-competes that were entered into before the rule’s effective date applies differently to senior executives compared to other workers. Non-competes with non-senior executives are no longer enforceable after the rule’s effective date.
**Existing Non-Competes with Senior Executives**: The rule allows existing non-competes with senior executives to remain in force. This distinction is made because senior executives are less likely to suffer the acute, ongoing harms that other workers might face from existing non-competes.
**Notice Requirement for Existing Non-Competes**: Employers must notify workers with existing non-competes that these clauses will not be and cannot be enforced against the worker. This notice must be provided by the effective date of the rule.
**Scope of Workers Covered**: The rule’s definition of “worker” is broad. It includes employees, independent contractors, interns, volunteers, and others regardless of worker’s title or status under other state or federal laws.
**Exceptions**: The rule does not apply to non-compete clauses entered into as part of a bona fide sale of a business entity or ownership interest. Additionally, it does not affect existing causes of action that accrued prior to the effective date.
This summary outlines the key aspects of the FTC’s new rule on non-compete clauses that employers and companies need to be aware of and is not meant to me overly comprehensive of every portion of the new rule. The full final rule issued by the FTC can be found here or you can contact Jurista Law for appropriate guidance on this issue.
