FTC Announces Final Rule Banning Most Non-Compete Agreements (Litigation Expected)
On April 23rd, 2024, the Federal Trade Commission (FTC) announced the finalization of its rule banning most non-compete agreements. The regulation—which is currently set to take effect in the Summer of 2024—will ban virtually all non-competes nationwide, including already-existing non-compete contracts. Here, our Florida employment agreement attorney provides an overview of the rule, the implications for non-competes, and what to watch for next.
What You Need to Know About the FTC’s Federal Non-Compete Ban
Most states, including Florida, allow non-compete agreements. However, the FTC has now announced a final rule banning virtually all non-compete agreements nationwide. Many businesses and employees in Florida have questions about the new rule. Here are five key things to know:
- A Nationwide Ban On Non-Business Owner Employee Non-Competes: The FTC’s final rule barring non-compete agreements is comprehensive. It bans virtually all employee non-compete agreements for for-profit businesses. There is a small exception for employees who own at least 25 percent of the business. Further, the FTC does not have regulatory authority of nonprofit organizations, so the ban does not apply to those entities.
- The Rule Applies Retroactively—Voids Many Existing Non-Competes: One of the most impactful aspects of the FTC’s rule is its retroactive application. It renders many existing non-compete agreements void. Non-competes signed by executive employees prior to the rule can remain in effect. However, all other employee non-competes for for-profit businesses would be voided.
- Rule Set to Take Effect in Late Summer of 2024 (September 4th): The FTC’s non-compete ban is scheduled to take effect on September 4th, 2024. The rule is currently set to be published to the Federal Register on May 7th, 2024. The rule becomes effective 120 days after it is published if it is not blocked by the federal courts.
- A Lawsuit has Been Filed to Stop the Regulation: Legal action has already been taken in an effort to delay or even stop the FTC rule from taking effect. As reported by USA Today, the Chamber of Commerce and other groups have already filed a lawsuit. The legal challenge adds a layer of uncertainty to the future of the non-compete ban. It may ultimately be up to the Supreme Court to determine if the FTC has the authority to bar non-competes.
Summary: The FTC has moved to prohibit for-profit businesses from using non-compete agreements. Most existing non-competes for for-profit businesses will be invalidated by the regulation. The rule is scheduled to take effect in September of 2024. However, a lawsuit has been filed to stop its implementation. Nothing is technically final yet. Our firm will watch for any legal, regulatory, and legislative developments on this important issue.
Contact Our South Florida Employment Agreement Lawyer Today
At Perkins Law, we are a brand protection law firm committed to providing reliable guidance and support to clients. Have questions about the FTC’s rule on non-competes? We can help. Call us now or contact us online for a confidential initial consultation. We serve communities throughout South Florida, including in Broward County, Miami-Dade County, and Palm Beach County.
Source:
ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
