New FTC Rule Bans Employers from Using Non-Compete Agreements
FTC Announces Special Open Commission Meeting
Fewer than 1% of Workers Affected by Final Rule's Definition of "Senior Executive"
New York, CNN - The Federal Trade Commission (FTC) today issued a final rule that will ban for-profit US employers from making employees sign non-compete agreements. The rule, which goes into effect in January 2025, will apply to all employment contracts, including those that have already been signed.
The FTC estimates that fewer than 1% of workers are senior executives who would be exempt from the new rule. The rule specifically defines "senior executive" as an employee who:
- Has the authority to make independent decisions on behalf of the employer
- Has access to confidential information
- Is responsible for overseeing a significant portion of the employer's business
FTC Chair Lina M. Khan said in a statement that "non-compete agreements are a form of wage suppression that stifle innovation and mobility." She added that the new rule "will make it easier for workers to leave their jobs for better opportunities and start their own businesses without fear of being sued."
The FTC has been considering a ban on non-compete agreements for several years. In 2021, the agency issued a proposed rule that would have banned all non-compete agreements. However, the final rule is narrower in scope and exempts senior executives.
The business community has criticized the new rule, arguing that it will make it more difficult for businesses to protect their confidential information. However, the FTC maintains that the rule is necessary to protect workers and promote competition.
The FTC will hold a special Open Commission Meeting on May 12, 2024, to discuss the new rule. Members of the public are invited to attend the meeting and provide comments.
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