Today, the Federal Trade Commission (FTC) voted 3-2 in favor of a ban on noncompete agreements. The rule, which affects new and existing noncompete agreements, will go into effect 120 days after the rule is published in the Federal Register. Legal action to block implementation of the rule is likely. Nevertheless, employers should still prepare for it to go into effect.
Under the final rule, the FTC adopts a sweeping ban on all new noncompete agreements with workers at all levels, including senior executives. It also makes most existing noncompete agreements unenforceable. Employers will be required to provide notice to those workers bound by existing noncompete agreements that the employer will not be enforcing them. The FTC included model language in the final rule for this purpose
The final rule does provide is a carve out for existing noncompete agreements with senior executives. Those will remain in force after the effective date. For purposes of the final rule, senior executives are those making more than $151,164 annually who are in policy-making positions.
The FTC noted that employers have alternatives to noncompete agreements that allow them to protect themselves, including non-disclosure or confidentiality agreements, and trade secrets laws. Employers who are concerned with this new rule should work with legal counsel on implementing alternatives to protect their interests.
As a reminder, Nevada law (NRS 613.195) already prohibits noncompete agreements with hourly workers and places restrictions on the terms of noncompete agreements in all other cases.
NAE will continue to monitor developments regarding this final rule, including any legal challenges, and keep members updated to ensure they remain in compliance.
