FTC adopts rule banning non-competes

The Federal Trade Commission (“FTC”) has adopted a rule banning non-compete agreements across all industries. Going forward, new non-competes are banned. Looking backward, “employers will simply have to provide notice to workers bound to an existing noncompete that the noncompete agreement will not be enforced against them in the future.” Senior executives who earn more than $151,164.00 annually and who are in policy-making positions may still be bound by existing agreements, but new non-competes are banned. The rule goes into effect in 120 days and litigation is anticipated. The FTC suggests that businesses worried about unfair competition can still rely on state-by-state trade secret statutes and confidentiality agreements.

From the FTC press release:

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

From the Washington Post:

“The uncertainty created by these rules and the future litigation creates a risky landscape for businesses as they try to protect their most valuable trade secrets and confidential information,” said Berman, co-chair of her firm’s practice for business litigation, trade secrets and restrictive covenants, in an email. “I think we’ll see rapid movement by businesses to implement alternatives to noncompetes — such as non-solicitations agreements and deferred compensation plans — because they won’t take a gamble on protecting their proprietary information.”

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