FTC Issues Final Rule on Noncompete Ban
Yesterday, the Federal Trade Commission issued its long-awaited Final Rule declaring that noncompete clauses in the employment context are an unfair method of competition and will be considered a violation of Section 5 of the Federal Trade Commission Act. The Final Rule outlines this ban in two timeframes focused on the Final Rule’s effective date — scheduled to be 120 days following publication of the Final Rule in the Federal Register (a date unknown at this point):
Noncompete agreements entered into on or after the effective date – all such agreements will be unenforceable, regardless of the position held or the salary earned by the worker.
All existing noncompete agreements – i.e. those entered into prior to the Final Rule’s effective date – all such agreements will be unenforceable with the exception of noncompete agreements entered into with “senior executives”. The Final Rule defines this term to refer to workers earning more than $151,164 annually who are in a “policy-making position.”
The Final Rule largely retained the ban elements described in the Proposed Rule issued a year ago, including: application to all workers, including independent contractors; allowing noncompete agreements in the sale of business context; allowing reasonable customer nonsolicitation agreements and nondisclosure agreements; and requiring employers to affirmatively rescind existing noncompete agreements by written notice to employees and former employees.
There remain significant questions regarding the FTC’s statutory authority to engage in this type of sweeping rulemaking, and we anticipate the prompt filing of legal actions to halt the implementation of this Final Rule by a court injunction. The U.S. Chamber of Commerce has already announced plans to file suit against the FTC over this rule. The Firm is monitoring these developments closely and considering legal options in the face of this new rule.
We encourage clients to reach out for further guidance. For more information, please contact David Robinson, Jack Finklea, Don Vogel, Sari Pettinger, or Alaina Hawley.
News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
FTC Issues Final Rule on Noncompete Ban
Yesterday, the Federal Trade Commission issued its long-awaited Final Rule declaring that noncompete clauses in the employment context are an unfair method of competition and will be considered a violation of Section 5 of the Federal Trade Commission Act. The Final Rule outlines this ban in two timeframes focused on the Final Rule’s effective date — scheduled to be 120 days following publication of the Final Rule in the Federal Register (a date unknown at this point):
Noncompete agreements entered into on or after the effective date – all such agreements will be unenforceable, regardless of the position held or the salary earned by the worker.
All existing noncompete agreements – i.e. those entered into prior to the Final Rule’s effective date – all such agreements will be unenforceable with the exception of noncompete agreements entered into with “senior executives”. The Final Rule defines this term to refer to workers earning more than $151,164 annually who are in a “policy-making position.”
The Final Rule largely retained the ban elements described in the Proposed Rule issued a year ago, including: application to all workers, including independent contractors; allowing noncompete agreements in the sale of business context; allowing reasonable customer nonsolicitation agreements and nondisclosure agreements; and requiring employers to affirmatively rescind existing noncompete agreements by written notice to employees and former employees.
There remain significant questions regarding the FTC’s statutory authority to engage in this type of sweeping rulemaking, and we anticipate the prompt filing of legal actions to halt the implementation of this Final Rule by a court injunction. The U.S. Chamber of Commerce has already announced plans to file suit against the FTC over this rule. The Firm is monitoring these developments closely and considering legal options in the face of this new rule.
We encourage clients to reach out for further guidance. For more information, please contact David Robinson, Jack Finklea, Don Vogel, Sari Pettinger, or Alaina Hawley.
News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.