FTC Finalizes Sweeping Ban on Non-Compete Agreements

The Federal Trade Commission released its final rule banning most current and nearly all future non-compete agreements between employers and employees, including potentially certain non-disclosure, non-solicitation, and forfeiture agreements. Existing agreements with senior executives are exempt from the rule, which goes into effect 120 days after publication in the Federal Register, which will likely occur within the next two weeks.

HRPA advocacy: The Association strongly opposes the final rule. However it does include two key changes from the proposed version, advocated for by the Association: (1) An exemption for existing agreements with senior executives, and (2) No ownership percentage threshold requirement for business sales (non-competes for business sales are exempted from the rule). 

HRPA’s top takeaways: The rule is already the subject of two lawsuits. While it is possible that the court will delay implementation of the rule pending litigation, employers should plan to comply by the effective date. Regardless of the outcome of the FTC rule, the movement to restrict or prohibit non-compete agreements has rare bipartisan support and is growing. In addition to federal legislation, more and more states, including red states, are considering similar prohibitions. For more, see our top practical takeaways for CHROs and employers, and specific next steps to consider. 

HRPA Webinar: Join our May 8^th webinar, What the FTC Non-Compete Rule Means for Companies & Next Steps, to learn more!