FTC Bans Non-Compete Clauses for all Companies Nationwide

On Tuesday, April 23rd, the Federal Trade Commission issued a final rule banning non-compete provisions nationwide. Once the rule takes effect (120 days after it is published in the Federal Register), almost all existing non-compete provisions will become unenforceable. Although certain senior executives will remain subject to non-compete clauses entered into prior to the effective date, no future clauses will be enforced. The rule does not apply to non-competes entered into in connection with the bona fide sale of a business entity.

Once the rule takes effect, employers must inform their employees (including independent contractors) that their existing non-competes are no longer enforceable. Employers are forbidden from attempting to enforce their existing non-compete agreements and from seeking new non-compete agreements from their employees. Employers are permitted to enforce existing non-compete clauses, however, if the cause of action arose prior to the rule’s effective date.

The U.S. Chamber of Commerce already has filed a lawsuit challenging the new rule and seeking to delay the effective date, and challenges from others are expected.

If you have any questions regarding the current status of the rule, or how it affects your business, please call Stan Sneeringer at (312) 261-2238.

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