On April 23, the Federal Trade Commission (FTC) voted 3-2 to publish its proposed final rule banning most noncompetition agreements, or “noncompetes.” The final rule was published on May 7, in the Federal Register and therefore becomes effective 120 days later, on Sept. 4, 2024, but legal challenges to the FTC’s authority to issue this ban will likely result in a stay in enforcement of the ban until litigation is resolved.

As of the effective date, the final rule would ban new noncompetes with employees, independent contractors, and volunteers nationwide, on the basis that noncompetes are an unfair method of competition and therefore a violation of Section 5 of the FTC Act, with one exception. The ban will not apply to a noncompete that is entered into pursuant to the bona fide sale of a business, the persona’s ownership interest in a business entity, or all (or substantially all) of a business entity’s operating assets.