On May 7, the Federal Trade Commission (FTC) published a final rule banning the enforcement of nearly all noncompete clauses in employment agreements nationwide (89 FR 38342). This new rule will have sweeping effects across all sectors of the economy, if it survives court challenges that have already been filed (see, e.g., Chamber of Commerce of the United States of America v. FTC, 6:24-cv-00148 (E.D. Tex., April 24, 2024).

What Is the New Rule?

The FTC’s new rule makes it an unfair method of competition to enter into new noncompete clauses or enforce existing noncompete clauses after Sept. 4, 2024 (120 days after publication of the rule in the Federal Register), with very limited exceptions: existing noncompete clauses with senior executives can remain in force, though new ones are not allowed, allowing for a sunset period; and noncompete agreements tied to the sale of a business entity can remain valid.