FTC to Vote on Rule to Ban Employers from Using Non-Compete Agreements

UPDATE 4/23/2024:

On April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 on the issuance of a final rule to ban non-compete agreements. The final rule will go into effect 120 days after being published in the Federal Register. Continue to follow us as we track the latest.

If you are an employer who requires employees to sign a noncompete agreement as a condition of employment, as part of your employee handbook, or upon separation of employment, prepare to have your world turned upside down. While many states have tightened the reins of the enforceability of noncompetes, it was still difficult for many employers to imagine something like this.

The proposal made by the Federal Trade Commission (FTC) in January 2023 was to make it illegal for any employer in the United States to enter or attempt to enter into a noncompete with a worker.  If a noncompete already exists between a worker and employer, the employer must rescind the noncompete within 180 days of the proposal becoming a Final Rule.

Who is a worker? Anyone who performs work for your organization, whether paid or unpaid, employees, volunteers, interns, work-study workers, and yes-wait for it-independent contractors. You cannot have an independent contractor promise not to provide similar services to others while or after they are working on a project for you.

So, what’s the story on this rule today? Should I panic? That’s a great question. The FTC will have a meeting on the Final Rule and vote on whether the rule should be entered into the Federal Register on April 23. If the rule is entered into the Federal Register, the 180-day tolling period for rescinding previous agreements begins.

If the final rule is entered into the Federal Register on April 23 it will undoubtedly face legal challenges. But for now, the expert employment law attorneys at myHRcounsel® suggest alternatives that are less risky but still preserve your all your rights.

And speaking of protecting your rights…WHEN WAS THE LAST TIME YOU HAD YOUR EMPLOYEE HANDBOOK REVISED? If a noncompete is in your handbook, your entire handbook may be out of date. Having an employee handbook that tells your employees what they need and nothing they don’t is a great way to kick off the summer and be ready for the law changes that start in Q3. Our best practices handbook is included with your ASK HR subscription-no additional fees!

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