The FTC’s Rule Banning Noncompetes: September 4 Effective Date and FTC-Sponsored Compliance Webinar
On April 30, the Federal Register announced that the Federal Trade Commission’s (FTC) Non-Compete Clause Rule is scheduled to be published on May 7. The Rule becomes effective 120 days after publication, resulting in an anticipated effective date of September 4, 2024.
Read the Federal Register announcement here.
As of the effective date, most employers will be prohibited from entering into noncompete agreements with most workers, and prior noncompetes will be rendered unenforceable, except as to “senior executives.” Employers will also be required to make individualized notice to workers informing them that their noncompetes are unenforceable. The FTC has provided a form notice, found on page 566 of the Final Rule.
Additionally, on May 2, the FTC announced that it will host an online compliance webinar on May 14 at 11:00 am ET “to provide an overview of the FTC’s final rule banning noncompetes, which will include information on how to comply with the rule after its effective date.” Questions may be submitted prior to the webinar to asknoncompete@ftc.gov. The webinar will be recorded, for those unable to attend live.
The FTC’s authority to issue the rule is currently being challenged in three separate federal lawsuits. Most notably, on April 24, the US Chamber of Commerce filed a Motion for Stay of the Effective Date and Preliminary Injunction, seeking a ruling from the Eastern District of Texas halting the effective date of the rule while the litigation proceeds. The court has set a tight briefing schedule, with a hearing expected in late-June or early July.
While the legal battles play out, employers should prepare for the September 4 effective date, and consider attending the FTC’s webinar to learn more about what will be required of them if the Rule withstands challenge.
ArentFox Schiff’s Trade Secrets, Noncompetes & Employee Mobility Team has been tracking the rule since the FTC’s notice of proposed rulemaking in January 2023. This alert is part of a series of updates addressing the rule and its implications. Visit our dedicated webpage for forthcoming additional alerts and to view our webinar on this topic.
