NAIFA Offers Analysis of FTC Non-Compete Rule

The Federal Trade Commission voted 3-2 along partisan lines at an April 23 open Zoom meeting to approve its final Non-Compete Clause Rule which will ban most non-compete agreements.

The 570-page Final Rule becomes effective 120 days after it is published in the Federal Register unless a court issues an order staying that effective date while it considers challenges to the Final Rule. The Final Rule is expected to be published on April 25, 2024, and it would then become effective on August 23, 2024. Legal challenges are, however, expected to be filed immediately.

It is widely expected that the Final Rule will be stayed while those challenges are pending and likely that those legal challenges ultimately will result in the Final Rule being struck down.

As discussed in more detail below, the Final Rule would completely ban the use of “noncompete” clauses going forward with two important exceptions. The Final Rule expressly does not apply to (or ban):

1. “Non-compete” agreements already in place with “Senior Executives” (individuals with “policy making authority” who were paid more than $151,164 in total compensation for the preceding year on an annualized basis); or
2. “Non-compete” agreements that are effectuated as part of the sale of a business.

NAIFA Counsel Steptoe has completed a more in-depth analysis of the Final Rule.