FTC’s New Rule Banning Non-Compete Agreements | Brian Heger

Workforce Trends

Non-compete agreements, which restrict employees from competing with their employer during or after employment, are used in various organizations. These agreements often prevent an employee from working for a direct competitor, starting a competing business, working in the same industry, or soliciting the employer’s customers or clients. According to the Federal Trade Commission (FTC), about one in five American workers—approximately 30 million people—are bound by a non-compete clause. On April 23, 2024, the FTC issued a final rule preventing employers from entering into new non-compete agreements with workers and requiring employers to notify workers with existing non-compete clauses that those agreements will not be enforced. The rule, set to become effective on September 4, 2024, will essentially void existing non-compete agreements, except for those involving “senior executives,” defined as individuals in policy-making positions who received at least $151,164 in total compensation in the preceding year (or annualized if employed for a partial year). Here is the FTC document on the rule (warning: it is 570 pages). HR leaders and their teams will play an important role in helping to determine and plan for the many implications of this rule for their organizations, including talent management for an unrestricted talent market. What actions is/will your organization take in response to the FTC’s new rule?