On April 23, 2024, Federal Trade Commission issued Final Non-Compete Clause Rule comprehensively banning post-employment non-compete clauses between employers and their workers. The Final Rule will be effective in September.
The final rule provides that it is an unfair method of competition for persons to enter into non-compete clauses with workers on or after the final rule’s effective date. The final rule defines “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work with competition or
(2) operating a business as a competition, after the conclusion of the employment that competes with the employer.
With respect to non-competes entered into before the effective date, the final rule
adopts a different approach for senior executives than for other workers. For senior executives, existing non-competes can remain in force, while existing non-competes with other workers are not enforceable after the effective date.The final rule provides no definition for executives.
The final rule preempts state laws that authorize non-compete clauses.