Updated: Federal Trade Commission Finalizes Rule Banning Noncompete Agreements for 99% of Workers

Updated 8-20-2024: A federal judge in Texas has invalidated a major Federal Trade Commission regulation aimed at banning noncompete agreements. U.S. District Judge Ada Brown ruled that the FTC overstepped its authority by attempting to regulate "unfair methods of competition." The rule, introduced by FTC Chair Lina Khan in April, sought to limit employers from restricting workers' job mobility. Ryan LLC, supported by the Chamber of Commerce, challenged the regulation, claiming it exceeded the FTC’s legal power. The court’s decision blocks enforcement of the rule, which was scheduled for September 4.

4-24-2024: The Federal Trade Commission has finalized a rule that would ban existing noncompete agreements for all workers except existing agreements with senior executives. The rule does, however, prevent new noncompete agreements from being put in place for all workers, including senior executives. The rule does not limit enforcement of non-disclosure agreements or trade secrets laws.

The rule also requires employers to notify any worker with an existing noncompete agreement that the agreement is no longer in effect. The FTC has developed model language to inform employees of the change.

For existing non-competes with senior executives, the rule sets up two requirements: first, the senior executive must earn more than $151,164 annually, and the senior executive must be in a policy-making position.

The rule will become effective 120 days after being published in the Federal Register, likely sometime in late August 2024.

The U.S. Chamber of Commerce has already filed a lawsuit to try and block the rule from going into effect. The Chamber and other allied business groups like the Business Roundtable have filed two lawsuits in Texas, this means the rule would likely end up in the 5th Circuit eventually, traditionally considered the most conservative appeals court in the country.

If you have any additional questions about labor regulations, please reach out to Alex Ayers.