FTC Issues Final Rule Banning Noncompetes Nationwide

The Federal Trade Commission (FTC) has issued a final rule prohibiting noncompete clauses. This new regulation stipulates that existing noncompete agreements will become unenforceable for the majority of employees following the rule's effective date, which is 120 days after publication in the Federal Register. However, it is important to note that this rule is expected to face legal challenges.

The new rule makes an exception for senior executives, who constitute less than 0.75% of the workforce, allowing their existing noncompetes to remain enforceable. Nevertheless, the rule prohibits all employers from drafting, entering into, or attempting to enforce any new noncompete agreements, even those involving senior executives. Additionally, employers are required to inform all other employees bound by existing noncompetes that these agreements will not be enforced.

This final rule follows a proposed rule issued by the FTC in January 2023. The rule underwent a 90-day public comment period, attracting over 26,000 comments—more than 25,000 of which supported the proposed ban on noncompete agreements.

Please contact our legal team for further details on how this rule may impact your business and contractual obligations.