On May 7, 2024, the Federal Trade Commission (FTC) issued a regulation that would prohibit enforcement of most noncompete clauses as of September 4, 2024, but the regulation is already being challenged in court. The regulation says:
- No new noncompete agreements may be signed on or after September 4, 2024.
- Existing noncompete agreements that were signed before September 4, 2024, aren’t enforceable unless the person who agreed not to compete against their former employer was a senior executive. A senior executive is someone who was in a policy-making position and whose total annual compensation was at least $151,164 in the preceding year (but that amount is prorated if they only worked part of the year).
- For any existing noncompete agreements that won’t be valid after September 4, 2024, employers must notify affected employees in writing. The FTC’s rule includes a model notice.
Tips: We believe it is unlikely that this regulation will stand up in court, but that remains to be seen. Vigilant will keep members apprised of any legal developments. Even if the FTC’s rule is invalidated, you still need to be aware of state laws if you intend to request or enforce a noncompete agreement, or if you hire someone who is subject to such an agreement. Our Legal Guide, Noncompetition Agreements, summarizes state laws and court decisions in California, Idaho, Montana, Oregon, and Washington.
