Staff Contact: Jane Drummond
The Federal Trade Commission finalized a rule that would ban noncompete agreements for nearly all occupations in the U.S. Once the rule is effective, employers will be required to notify employees currently subject to a noncompete agreement that the contract is no longer enforceable. The only contracts permitted to stay in effect are those with senior executives, defined as individuals in a policy-making position making more than $151,164 annually. Employers are prohibited from imposing new noncompete contracts with senior executives after the effective date of the rule.
The FTC’s jurisdiction extends to for-profit entities, and numerous commenters to the proposed rule asserted it could not regulate nonprofit or governmental entities. However, the FTC claims in the final rule that such organizations are not “categorically outside the Commission’s authority.” Due to the far-reaching implications of the rule, litigation to stop its implementation is likely. The rule has not yet been published in the Federal Register, but will take effect 120 days from the publication date.