The Federal Trade Commission (FTC) voted 3-2 on Apr. 23 to approve a ban on new noncompete agreements for all workers.
The ban includes a small carve-out that will allow existing noncompetes for senior executives, who are defined as workers in a "policy-making position" that earn over $151,164 annually, to remain in place. Existing noncompetes for all other workers will become unenforceable following the rule's effective date, and companies will be required to inform current and past employees that the agreements won’t be enforced.
Noncompete agreements prohibit an employee from working for a direct competitor and generally allow businesses, including NATSO members, to protect proprietary information and intellectual property.
NATSO previously filed comments in April 2023 opposing the FTC’s proposal arguing that there are many instances in which noncompete agreements are “reasonable and should not be disturbed.”
The new rule will go into effect 120 days after it is published in the Federal Register, though the new ban is highly likely to face litigation.
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