Legislative Alert – FTC Bans Non-Competes Nationwide

Circle August 23, 2024 on your calendar. Why? This is the date that all non-compete clauses nationwide will be unenforceable. Now you say “what?” The Federal Trade Commission (“FTC”) issued a Final Rule on April 23, 2024 named the “Noncompete Rule.” The FTC has ruled that noncompete clauses are an “unfair method of competition” and, as such, a violation for employers to enter into such agreements with “workers.” This new rule defines “workers” as employees, independent contractors, interns, externs, volunteers, and apprentices. A “non-compete clause” is defined as a term or condition of employment that prohibits or penalizes a “worker” from seeking or accepting work from a new employer at the conclusion of the “worker’s” current employment or starting/operating a business at the conclusion of the “worker’s” employment.

Beginning on August 23, 2024, it will be impermissible for an employer to enter into an agreement that contains a non-compete clause or attempt to enforce a pre-existing non-compete clause.

For each “worker” that has already entered into a contract (whether written or oral) with an employer and such contract contains a non-compete clause, the employer has the obligation to provide the “worker” with notice on or before August 23, 2024 that the non-compete clause is unenforceable. The Final Rule contains information as to what must be included in this notice.

This rule does provide for two exceptions when non-competes are able to be used. First, a non-compete provision is permissible if the employee earns a salary of at least $151,164 and the employee is in a policy-making position (such as a president or CEO). Second, a non-compete provision is permissible against the owner of a company when the company is selling substantially all of the assets of the company or the sale of the owner’s ownership interest in the company.

Non-compete clauses are currently enforceable in the State of Ohio but the clauses have to be reasonable. With this being said, the FTC’s Final Rule is in line with the growing trend across the country in that non-compete clauses are disfavored. Four states have banned non-compete clauses in their entirety and at least twelve other states have limited the use of non-compete clauses.

It is almost certain that legal challenges against this Final Rule will be filed. Stay tuned to learn if a court issues an injunction delaying the enforcement of this new rule. Do not hesitate to be in contact with any questions or to further discuss.

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Chris Corpus

Founding Partner at Corpus Law Inc

This article does not provide legal advice or create an attorney-client relationship. If you have any questions or would like to learn more about this topic or if you have other legal questions, do not hesitate to contact Chris Corpus, Esq. of Corpus Law Inc at 216-973-2475. Copyright Christopher A. Corpus 2024.