FTC Announces Rule Banning Non-Compete Agreements Nationwide

On April 23, 2024, the FTC announced a rule that would ban non-compete agreements nationwide. The rule, which is scheduled to go into effect 120 days after being published in the Federal Register, would also make existing non-competes unenforceable. There is an exception for senior executives with existing non-competes, which may remain enforceable.

The FTC largely views this rule as a big win for employees and expects it to result in a large increase in patents filed, business formation and employee earnings.

Employers who relied on non-compete agreements may need to consider alternatives, such as non-disclosure agreements (NDAs). The FTC also encourages employers to compete on the merits by improving wages and working conditions.

New York recently considered legislation to ban non-compete agreements within the State. The bill was ultimately vetoed to reconsider income limits associated with the ban. However, it was likely that the State would impose some sort of ban on non-competes in the near future.

There is a possibility that the FTC rule will face legal challenges that may delay or stop it from coming into effect. However, employees and employers should plan for the possibility that non-compete agreements, including those already in effect, may be unenforceable later this year.

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