[Before Update]
To date, courts have been reluctant to enjoin the FTC’s non-compete ban from taking effect on a nationwide basis. A ruling on the merits in the Ryan LLC et al. v. FTC case could still enjoin the rule, but such a ruling is not expected until on or before August, 30 2024, a mere two working days before the September 4, 2024 effective date.
Given the current uncertainty, employers should prepare for the possibility that the Rule will be go into effect as scheduled:
- Notification Requirement: On or before September 4, 2024, employers must provide written notice, via email, mail or text message, to all current and former employees with active non-competes (other than pre-existing non-competes with “senior executives” who earn at least $151,164 per year and have organization-wide policy making authority) that their non-compete is unenforceable. The FTC has published model language for employers to use for complying with the Rule’s notice requirement, which appears below:
The FTC’s Model Notice for Employers to Use
A new rule enforced by the Federal Trade Commission makes it unlawful for us to enforce a non-compete clause. As of [DATE EMPLOYER CHOOSES BUT NO LATER THAN EFFECTIVE DATE OF THE FINAL RULE], [EMPLOYER NAME] will not enforce any non-compete clause against you. This means that as of [DATE EMPLOYER CHOOSES BUT NO LATER THAN EFFECTIVE DATE OF THE FINAL RULE]:
- You may seek or accept a job with any company or any person—even if they compete with [EMPLOYER NAME].
- You may run your own business—even if it competes with [EMPLOYER NAME].
- You may compete with [EMPLOYER NAME] following your employment with [EMPLOYER NAME].
The FTC’s new rule does not affect any other terms or conditions of your employment. For more information about the rule, visit ftc.gov/noncompetes. Complete and accurate translations of the notice in certain languages other than English, including Spanish, Chinese, Arabic, Vietnamese, Tagalog and Korean, are available at ftc.gov/noncompetes.
Employers should thus make a list of current and former employees with existing non-competes who must receive such notice, and a list of senior executives who will continue to be bound by their pre-existing non-competes and thus will not receive such notice.
- Audit Your Existing Agreements
Review your current employment contracts, restrictive covenants, offer letters, handbooks, etc. to identify any non-compete clauses that the Rule may impact. Determine how these will be updated going forward, potentially with the inclusion of stronger or different non-solicitation and non-disclosure prohibitions.
- Contact Counsel for Assistance
Navigating these changes can be complex, but you don’t have to do it alone. Our Labor and Employment Group is here to guide you through these changes and help you to comply with the Rule. Whether you need to revise existing employment contracts, create a list of senior executives, notify impacted current and former employees or develop new or alternative strategies to safeguard your intellectual property, we are ready to assist.
Also, check out our previous alerts on this topic:
