The Federal Trade Commission (FTC) has issued a final rule that bans nearly all non-compete agreements. The rule will take effect 120 days after publication in the Federal Register, which is scheduled for May 7, 2024.
The final rule prohibits an employer from entering into or attempting to enforce non-compete clauses with any of its workers, including independent contractors, volunteers, and interns. The rule defines a “non-compete clause” as an agreement restricting a worker’s job opportunities after employment ends, so an employer could still forbid current employees from working for a competitor.
The rule includes some exceptions. Employers may enforce existing non-compete agreements against senior executives who are in policy-making positions and who earned at least $151,164 during the preceding year. The final rule also has a limited exception for non-compete agreements related to the sale of a business.
At least three lawsuits have already been filed to challenge the rule.
The rule does not give workers the right to sue for violations, so enforcement will rest with the FTC.
The final rule, which the FTC’s Democratic majority adopted on a partisan 3 to 2 vote, contains only minor changes from the controversial proposal published by the agency in January 2023.