“Noncompete Rule” Finalized

On April 23, 2024, the Federal Trade Commission (FTC) voted to finalize a new “Noncompete Rule” to prohibit employers from enforcing noncompetes against workers. The FTC determined that noncompetes are an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act (“FTC Act”).

There are several organizations already fighting this, but if it remains standing then the rule will take effect 120 days from publication in the Federal Register. The final rule’s expected effective date is September 4, 2024.

Details of the Rule once in effect

The final rule prohibits employers from entering into new noncompetes with all workers, including senior executives.

The rule prohibits employers from enforcing existing noncompetes with workers, other than senior executives.

• The rule requires employers to notify workers whose noncompetes are no longer enforceable that their
• noncompetes are no longer in effect and will not be enforced.
• The final rule defines the term “senior executive” as workers earning more than $151,164 who are in a “policy-making position.”

The rule does include an exception that allows noncompetes between the seller and buyer of a business.

If you have been following along the progression of this ruling, the final rule differs from the proposed rule in
several respects, such as:

• The rule does not ban existing noncompetes with senior executives.
• The rule simplifies the notice and compliance requirements for employers.
• The rule expands the sale of business exception.