In a special Open Commission Meeting held earlier today, the FTC voted to ban almost all non-competition agreements, declaring that non-competes are an unfair method of competition.

The FTC ban prevents employers from enforcing most existing non-competes and prohibits them from entering into new ones with existing or prospective employees. The rule bans all future non-competes including those for senior executives. The rule extinguishes all existing non-competes except for senior executives; existing non-competes for non-senior executives are unenforceable after the rule takes effect. A “senior executive” earns more than $151,164 annually and is in a “policy-making” position. The final FTC rule also requires employers to notify current and past employees under non-competition agreements that the agreements are unenforceable.

The FTC ban is the first nation-wide legislation affecting non-competition agreements, the enforceability of which until now has varied based on different state laws and regulations. The rule is projected to take effect in 120 days.

While the rule is likely to be challenged, it is incumbent on employers to review their existing and prospective employees’ restrictive covenant agreements, and evaluate alternative measures to protect legitimate business interests. Non-solicitation agreements and confidentiality agreements are not forbidden by the new rule. Similarly, it is imperative for workers to review their agreements with their employers and to understand the effects of the ban.

If you have any questions regarding the information covered in this blog, please contact Valeria Castanaro Galotta, John Baranello, or your primary attorney at Moses Singer.