Policy Briefing — April 23, 2024
The FTC finalized its noncompete ban, voiding existing agreements for most workers and requiring employers to deliver individualized notices by the rule's effective date.
Executive briefing: The Federal Trade Commission voted 3-2 on April 23, 2024 to issue a final rule prohibiting most noncompete clauses nationwide. Existing noncompetes become unenforceable for all workers except senior executives earning more than $151,164 in policy-making roles, and employers are barred from entering into new noncompetes after the effective date. Organizations must notify affected workers that their noncompetes are no longer enforceable.
Key requirements
- Ban on new agreements. Employers cannot enter into or attempt to enforce noncompete clauses with workers, including independent contractors, after the rule's effective date.
- Rescission of existing contracts. Covered employers must provide written notices to current and former workers subject to noncompetes, advising them the provisions cannot be enforced.
- Senior executive carve-out. Noncompetes with policy-making executives earning above the compensation threshold may remain but cannot be extended or replaced.
Operational priorities
- Inventory agreements. Catalogue employment, contractor, and equity documents to identify noncompete clauses and any functional equivalents, such as overly broad nondisclosure terms.
- Communication plan. Draft individualized notices using FTC model language and coordinate delivery timelines, including to former workers with available contact information.
- Policy updates. Revise onboarding, exit, and partner agreements to rely on permissible protections—confidentiality, non-solicitation, and trade-secret safeguards.
Program assurance
- Litigation readiness. Track legal challenges that may delay the rule's effective date and prepare contingency plans for jurisdictions with preliminary relief.
- Training. Educate HR, legal, and procurement teams on the noncompete ban and acceptable alternative restraints.
- Monitoring. Establish audit procedures to detect prohibited noncompete language in future contract templates.
Sources
Zeph Tech is helping employers execute the FTC noncompete ban by inventorying contracts, delivering notices, and strengthening trade-secret controls.