Federal Trade Commission Act has issued a final rule called the “Non-Compete Clause Rule”

The US Federal Trade Commission under authority granted to it under the Federal Trade Commission Act has issued a final rule called the “Non-Compete Clause Rule” effective Wednesday, September 4, 2024.

In short, this rule prohibits covered employers from entering into, enforcing, or attempting to enforce POST-EMPLOYMENT non-compete agreements with workers, with a very limited exception for certain senior executives.

 

Who is considered a worker?

 

           Workers are employees, independent contractors, interns, externs, and volunteers.

 

Who is considered a senior executive under the rule?

 

A senior executive is a person who (1) is in a policy-making position with final policy-making authority (President, CEO, Officer of the Company, or equivalent position) AND (2) earns at least USD 151,164.00 annually. Current non-competes remain in effect and can be enforced for persons qualifying as senior executives.

 

Who is a covered employer?

 

           All employers within the FTC’s jurisdiction except certain banks, savings and loan associations, federal credit unions, Common Carriers, Air Carriers, certain persons covered under the Packards and Stockyards Act, and Non-profit organizations.

 

What are your responsibilities as a covered employer?

 

           1. Employers subject to this rule must notify all workers (current and former employees with existing non-competes) who are parties to non-compete agreements that non-compete agreements are prohibited as of September 4, 2024, and that any existing non-compete agreement cannot and will not be enforced. This notification must be in writing, either via paper, mail, email, or text. The FTC has provided guidance and language that meets the minimum verbiage requirements for the notification.

 

           2. The mandatory required notification must be sent before Wednesday, September 4, 2024.

 

What else do Employers need to know?

 

           The new rule does not invalidate any confidentiality, non-solicit, non-disparagement, or other restrictive clauses in current employment agreements.

 

If you have questions regarding your company’s current agreements, your current agreement, or the written notification requirement, please get in touch with BridgehouseLaw LLP at (980)219-5200. One of our attorneys will be happy to assist you.

Crystal McBridem, Attorney, BridgehouseLaw LLP, Charlotte

image: istock