Federal Agency Issues Ban on Non-Compete Provisions But Faces Court Challenges



On April 23, 2024, the Federal Trade Commission (FTC) issued its final rule (Noncompete Rule).  The Noncompete Rule would ban almost all non-compete provisions as of its effective date.  The ban is scheduled to go into effect on or about September 4, 2024.  However, at least three cases have been filed in federal courts seeking to delay or prohibit the FTC from implementing its Noncompete Rule. 

Non-compete provisions restrict workers from competing with their former employers after their employment ends.  If the FTC’s ban goes into effect, it would (i) prohibit companies and individuals from entering into new non-compete agreements; (ii) void most existing non-compete clauses; and (iii) require employers to notify their workers that existing noncompete agreements are not enforceable.  In other words, employers would not be able to prevent their former employees from working for a competitor or starting their own competing businesses. The ban would affect most employers nationwide because the FTC is a federal agency with broad authority to enforce consumer protection and competition laws against companies and individuals.

We will track the cases challenging the FTC’s Noncompete Rule and update you on the status of the new Rule.  Meanwhile, we recommend that employers review any non-solicitation and non-disclosure clauses, or add those clauses to their employment agreements, to determine the best ways to protect their companies’ confidential information and trade secrets.

If you have any questions or concerns about the FTC’s Noncompete Rule or any federal or New York State employment laws, please contact Chaim Book at cbook@booklawllp.com, Sheryl Galler at SGaller@booklawllp.com, or Nadav Zamir at NZamir@booklawllp.com.