FTC Bans Almost All Non-competition Agreements

The FTC, in their Final Rule released online on Tuesday, April 23, 2024, determined that non-compete agreements are “an unfair method of competition”, and thus are in violation of Section 5 of the Federal Trade Commission Act (the “FTC Act”).

The ban, which will take effect in the latter half of 2024, carves out exceptions for non-competes given to senior executives, as senior executives are seemingly in a better position to negotiate the terms of any non-compete agreement and are less likely to be subject to the ongoing harm done by non-competes that the general workforce has to face.

Non-compete agreements for non-senior executives will no longer be enforceable after the Rule’s effective date.

A vital aspect of this Rule is the wide range of individuals who are covered – The Final Rule holds that the “workers” who will be subject to this change are natural persons classified as “. . . employee[s], independent contractor[s], extern[s], intern[s], volunteer[s], apprentice[s], or sole proprietor[s]”[1]

Despite this Rule being passed at the federal level, the FTC’s decision will apply to your Florida LLC, your Florida Corporation, or any other type of Florida business you may own or control. It is important to talk to a Florida attorney today to discuss how this Rule could impact your business.

The FTC seems confident in its decision to crack down on non-compete agreements. The FTC has advertised that this Rule will lead to the creation of over 8,500 new businesses and will result in typical workers making $524 more per year on average.

It will be at least 3 months until this Rule becomes effective (the effective date is 120 days after the publication of the Rule in the Federal Register), and it will likely take years before the impact of this change can be fully realized. Be sure to follow our blog if you want to keep up-to-date with the latest developments in the FTC non-compete saga.

[1] https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf (Page 4).