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 4th:
- Identify & assess what non-compete agreements the company currently has with its workers.
- Review related documents, including:
- Restrictive covenant agreements
- Executive employment agreements
- Offer letters
- Separation agreements
- Employee handbooks
- HR policies
- Equity-related agreements
- 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”.
- 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(except for those with senior executives) in which it clearly informs affected individuals that their non-compete is no longer in effect.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 4th a court concludes that the rule is unconstitutional & should never have taken effect.
- The FTC has created & made available a template in multiple languages.
- 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.
Author: Salvatore LoDico, SPHR
The HR Godfather TM
CEO, Trinity HR Consulting, Inc
Trinity HR provides retained searches and a full range of other HR management consulting services & solutions with clients throughout the U.S. Our clients:
- Range from large public corporations to start-ups & small family-owned businesses
- Include both for-profit and not-for-profit organizations.
To schedule a no cost, no obligation conversation about your needs & how our Team’s expertise can help you, email me at SalLoDico@TrinityHR.net or call me at 856.905.1762.
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