FTC Votes to Ban Most Employee Noncompete Agreements

In a significant move intended to give workers more freedom and promote fair competition among businesses, the Federal Trade Commission (FTC) recently announced a final rule effectively banning most noncompete agreements nationwide. This decision represents a major shift in the employment landscape, with far-reaching implications for both employers and employees.

Noncompete agreements, which restrict employees from working for companies within the same field as their former employer, have long been a contentious issue. Critics argue that these agreements stifle innovation, limit career opportunities and depress wages. The FTC’s ban seeks to address these concerns by removing barriers to worker mobility and fostering a more dynamic and competitive labor market.

Specific elements of the new standard include the following:

• Ban on new noncompetes The FTC rule prohibits employers from entering into new noncompete agreements with workers, including employees, independent contractors, interns and volunteers. This applies to all levels of employment, from entry-level positions to senior executives.
• Non-enforcement of most existing noncompetes For most workers, existing noncompete agreements will no longer be enforceable after the rule’s effective date of September 4, 2024. However, certain agreements currently in place with senior executives will still be valid. The FTC estimates that the executive exception covers less than one percent of the agreements in force.
• Notice to employees Employers are required to notify workers bound by existing noncompetes that these agreements will not be enforced. This ensures transparency and provides workers with the freedom to explore new job opportunities without fear of legal repercussions.

While the ban on noncompetes presents challenges for employers accustomed to using these agreements to protect trade secrets and investments in training, it also encourages them to focus on alternative strategies for retaining talent and protecting proprietary information.

As a law firm serving numerous Georgia small businesses, Dyer Rusbridge Argo, P.C. in Canton can help employers who previously relied on noncompete agreements adjust to the new legal landscape. We can also negotiate contracts that focus on safeguarding intellectual property and other information while remaining in compliance with the FTCs ban. To discuss this area of law or something else that affects your business, please call 770-450-5733 or contact us online.