On April 23, 2024, the Federal Trade Commission took action to finalize its rule banning non-compete agreements for nearly all workers. The scope of the rule encompasses employees, independent contractors, interns, volunteers, and sole proprietors who provide a service.
Not only does the rule prohibit employers from entering into any new non-competes, it requires them to contact all past and present employees who are subject to restrictions on competition and notify them that those restrictions will not be enforced. An exception is that existing non-competition agreements may continue to be enforced against “senior executives” (those who earn at least $151,164 annually and hold a policy-making position).
The rule does not prevent employers from protecting their trade secrets by use of nondisclosure agreements as long as those agreements are not overly broad. An NDA that effectively restricts competition will likely be viewed as a violation of the rule.
Non-compete agreements will still be permissible in the context of a bona fide sale of a business.
The rule is controversial and pro-business groups will almost certainly work to block it. At present, it is meant to go into effect 120 days after it is publication.
For additional information, contact Jill McQueen at (330) 563-4174 or email jmcqueen@aghattorneys.com.
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