FTC’s Non-Compete Rule: Impacts and Strategies for Businesses
On September 4th, 2024, the Federal Trade Commission’s non-compete rule will go into effect. Let’s break down what this means for your business.
No More Non-Competes
Starting on September 4th, covered businesses can no longer enter into non-competes with workers.
Which businesses does the rule cover?
The rule applies to most businesses with the only exceptions being certain nonprofits, banks, savings and loans institutions, Federal credit unions, common carriers, air carriers, and members of the livestock, meat, and poultry industries.
What is a non-compete?
A non-compete is a provision that restricts a worker from working for or operating another business when their employment ends.
While non-competes are typically contract terms, a workplace policy can also be considered a non-compete if it has the effect of restricting a worker from working for or operating another business when their employment ends.
Does the rule apply to all employees?
The prohibition on non-competes applies to all workers. This means it applies not only to employees but also independent contractors, interns, and volunteers.
Existing Non-Competes Will Be Unenforceable
On September 4th, any existing non-competes will become unenforceable. There is one narrow exception to this change: Existing non-competes with senior executives can remain in effect. A senior executive is a worker who is in a policy-making position and earns a total annual compensation of at least $151,164.
If your business has any existing non-competes that will no longer be enforceable, you are required to notify the worker, by September 4th, that the non-compete will not be, and cannot legally be, enforced against them. The FTC has provided a model notice that you can use: FTC Model Notice
Protecting Your Business’ Interests
This new rule has left a lot of business owners asking what they can do to protect their business interests now. While non-competes will now be barred, there are still other mechanisms available to protect your business’ interests, including non-disclosure and non-solicitation agreements.
A non-disclosure agreement can restrict a worker from disclosing certain confidential information for a period of time. A non-solicitation agreement can restrict a worker from soliciting the business’ customers for a period of time.
Levene Legal can help you determine the best strategy for protecting your business interests in the wake of the FTC’s non-compete rule.
