Freedom! – FTC Votes To Ban Non-Competes
As promised, this week’s MPL GCC will provide an overview of the FTC’s decision to ban non-competes. I am not certain if this decision was much of a surprise. For employers, it was like the steamroller scene in Austin Powers. For employees and contractors (current and former), maybe they let out a collective Braveheart inspired scream of “Freedom”. Regardless, it will be finalized and enforceable 120 days after publication (FYI, the publication date is May 7th, 2024…which means September 4, 2024 is the effective date) in the Federal Register.
We thought it might be easier to provide some of the key components, unless you wanted to read 570 pages:
- An employer cannot impose a non-compete clause on a “worker” (This term is used because it includes employees and independent contractors).
- Employer’s can maintain existing non-compete agreements with “senior executives” (i.e., those making over $151,164/year or who have a policy making position for the organization). However, new non-competes for “Senior Executives” are barred.
- Non-competes related to a business sale are permitted.
- Non-compete causes of action (i.e. lawsuits) for issues that arose prior to this rule are still allowed.
- If a State law currently permits non-competes, this rule supersedes it.
- An employer must provide notice to workers who are subject to a prohibited non-compete clause that it is no longer enforceable (FYI, it must be an individualized communication; hand-delivery – by mail at the worker’s last known street address, by email, or by text message).
As you may expect, the lawsuits have been initiated. Also, I suspect the pending Supreme Court decision related to the Chevron case may come into play here. It will be interesting to watch.
Please reach out to your professional business advisors (namely business legal counsel) with any questions.
A few things that may be of interest:
- Economic Review: May 2024 – Silvercrest (silvercrestgroup.com) (thanks to Sean O’Dowd for sharing)
- Building Resilience | Strategies for Thriving Amidst Change in a Law Firm (eisneramper.com)
- The RKL Private Wealth Podcast, Ep.4: Stewarding a Legacy – RKL LLP (rklcpa.com)
- A Roadmap to GLBA Requirements for Auto Dealerships – RKL LLP (rklcpa.com) Navigating the Proposed 2024 FLSA Changes | RKL LLP (rklcpa.com)
As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.
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