NATION-WIDE INVALIDATING & BANNING OF NON-COMPETE AGREEMENTS TO TAKE EFFECT SEPTEMBER 4, 2024

The September 4, 2024 effective date of the Federal Trade Commission’s rule that would essentially INVALIDATE ALL PRE-EXISTING U.S. NON-COMPETE AGREEMENTS & BAN FUTURE ONES is rapidly approaching. It will take effect UNLESS one of the following occurs:

• A nationwide injunction of the rule being issued

      or

• The FTC voluntarily agreeing to delay the effective date while the legal process plays out
  • Several states (including PA, TX & FL) have challenged the FTC’s authority to issue this rule. 

SUGGESTED STEPS

Here are some suggested next steps U.S. businesses may want to consider taking between now & September 4^th:

1. Identify & assess what non-compete agreements the company currently has with its workers.
2. Review related documents, including:
   • Restrictive covenant agreements
   • Executive employment agreements
   • Offer letters
   • Separation agreements
   • Employee handbooks
   • HR policies
   • Equity-related agreements
3. Determine whether any workers subject to a non-compete agreement are or might be considered “senior executives” as defined by the FTC in its rule.
   • The rule makes an exception for senior executives with non-competes that were in place prior to September 4, 2024.
   • After that date there is NO EXCEPTION for existing or new senior executives.
   • NOTE: The FTC’s commentary cautions that “mere job title alone is insufficient”. The FTC takes the position that “senior executives are relatively few in number”.
4. Prepare a template notice regarding pre-existing non-compete agreements (except for those with senior executives) in which it clearly informs affected individuals that their non-compete is no longer in effect.
   • The FTC rule requires that, for all pre-existing non-compete agreements (except for pre-existing non-competes with senior executives) the employer must provide “clear and conspicuous notice to the worker,” BY THE RULE’S EFFECTIVE DATE.
     • Obviously, this is a potential predicament for employers in that if after September 4^th a court concludes that the rule is unconstitutional & should never have taken effect.
   • The FTC has created & made available a template in multiple languages.

Author: Salvatore LoDico, SPHR

  The HR Godfather ^TM 

  CEO, Trinity HR Consulting, Inc