Advocacy News – April 23, 2024
The Federal Trade Commission (FTC) voted 3-2 Tuesday, April 23 to ban essentially all noncompete agreements between employers and employees.
Why it matters: The FTC’s final rule will have far-reaching impact across industries. It is estimated that it could impact tens of millions of workers nationwide by preventing employers from entering into noncompete agreements with workers and require employers to rescind existing noncompete agreements.
The final rule bans new noncompete agreements with all workers, including senior executives after the effective date. Specifically, the final rule:
- Provides that it is an unfair method of competition — and therefore a violation of Section 5 of the FTC Act — for employers to enter into noncompetes with workers after the effective date.
- Provides that existing noncompetes with workers — other than senior executives are not enforceable after the effective date of the final rule.
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- Provides that, for senior executives, existing noncompetes can remain in force. However, the FTC estimates that fewer than 1% of workers are estimated to be senior executives under the final rule because the final rule defines the term “senior executive” to refer to workers earning more than $151,164 annually who are in a “policy-making position.”
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The rule will go into effect 120 days after it is published in the Federal Register.
Go deeper: The MI Chamber raised concerns on the proposed rule in April of 2023; read those comments HERE. Read the FTC’s press release on the rule HERE.