Set Them Free! Reeling from FTC News Largely Eliminating Noncompetes

The Federal Trade Commission issued a final rule that prohibits new non-compete agreements with workers, with limited exceptions for business transactions. The rule provides that existing non-compete agreements with non-senior executives become unenforceable as of the effective date. Existing noncompetes with senior executives can remain in force but no new noncompetes (outside the limited exception) with any worker may be entered into after the effective date (120 days after the final rule is published in the Federal Register). The rule is expected to come under legal attack. 

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Related Content

• Executive Separation Agreement (Pro-employer)
  Notify individuals subject to existing (now) unenforceable non-competes regarding the effect of the rule. An exception applies for non-competes entered into pursuant to a bona fide sale of a business entity, the assets of a business, or a person’s interest in a business entity.

• Executive Employment Agreement (Pro-employer)
  Review of existing agreements with noncompetes will be necessary. Senior executive status will be required for existing noncompetes to remain in force. For purposes of the senior executive grandfather rule, a senior executive is one who receives total annual compensation of at least $151,164 per year and is in a “policy-making position.”

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