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Employer Alert: FTC Issues Rule Banning Most Non-Competes

The Federal Trade Commission (“FTC”) has issued a final rule banning most non-competes nationwide. The rule prohibits employers from entering into new non-compete agreements with employees and other workers and provides that existing non-competes are not enforceable. Moreover, employers with existing non-compete agreements will be required to notify their employees that any non-compete agreement is unenforceable. Exempted from this prohibition are existing agreements for senior executive who are actively involved in policy making within their organization and make more than $151,164 annually.

The rule is slated to go into effect within 120 days from today. It is anticipated that there will be legal challenges to the rule which may delay the rule.

The rule does not affect prohibitions against the disclosure of confidential information or other types of non-disclosure agreements that address employers’ intellectual property. The rule does not address non-solicitation agreements (preventing employees from soliciting an employer’s customers or employees); however, the rule makes it clear that an agreement will be deemed to be unenforceable if it effectively prohibits competition.

GKH’s employment attorneys will continue to monitor this rule and the outcome to any legal challenges. We will keep you posted.

Given the likelihood of legal challenges, we are recommending that employers do not take action at this juncture. However, employers need to understand and prepare for the possibility that any non-competes will be unenforceable. This development has been in the works for a number of years and even if legal challenges to the FTC’s ability to issue such a rule succeed, it is anticipated that the current trend of limiting non-compete agreements will continue.


(Jeff Worley practices in the areas of employment law, business law and general litigation. Jeff is a member of the firm’s Advocacy Group and Corporate Practice Group. Jeff also provides training to employers on a wide range of topics.)