BREAKING NEWS: FTC Bans Noncompete Agreements

To view this email as a webpage, click here.

The U.S. Federal Trade Commission (FTC) today approved a final rule banning most new noncompete clauses in employment contracts—a sweeping change affecting millions of workers.

The rule also makes all existing noncompete agreements except for those covering senior executives unenforceable and requires employers provide notice to current and former workers that their noncompete clauses are no longer in effect.

The rule goes into effect 120 days following its publication in the Federal Register. Enforcement could be further delayed by likely legal challenges.

SHRM does not support the FTC's sweeping blanket ban on the use of noncompete agreements, saying that the rule is too broad. "SHRM has consistently advocated for allowing parties to consent to well-structured noncompete agreements versus a blanket ban on such agreements," said Emily M. Dickens, chief of staff and head of government affairs for SHRM. "Blanket bans on noncompete agreements pose significant challenges for HR professionals tasked with safeguarding their employers' intellectual property and preventing unfair competition."

Employer takeaway: Employers are advised to revisit their restrictive covenants to ensure compliance, consider whether business interests can be protected with properly tailored nonsolicitation or confidentiality clauses, and limit trade secret access only to those who need it.