The Federal Trade Commission (FTC) approved a Final Rule on April 23, 2024 banning almost all worker noncompetes. Questions abound regarding the authority of the FTC to create such a rule and the potential implications of its implementation. To help create some clarity, Morgan Lewis lawyers have prepared answers to frequently asked questions (FAQs) related to the Final Rule’s applicability and anticipated impact as well as what businesses can do to prepare.
Key takeaways include the following:
- The Final Rule provides that nearly all existing worker noncompetes are not enforceable, subject to the three carveouts we highlight in the FAQs
- The Final Rule prohibits other types of agreements with workers that could operate as a form of noncompete such as certain customer nonsolicitation or nondisclosure covenants
- There are specific exceptions to the Final Rule, such as the sale of business or franchisee exceptions, and certain categories exempt from the FTC’s jurisdiction as further explained in the FAQs
- As to practical next steps, businesses should consider audits of existing noncompetes and determine which workers are “senior executives” or otherwise exempt from the Final Rule’s prohibition on noncompete clauses; the FAQs highlight other practical solutions that business should consider
For more information, please join us for a discussion later today, May 3, at 1:30 pm ET to learn more about the rule’s impact and gain insights from lawyers who specialize in antitrust, appellate, employment, executive compensation, intellectual property, and M&A transactions.