Compliance with the FTC's Noncompete Rule

April 23, 2024, the Federal Trade Commission (FTC) voted to finalize a new rule that prohibits employers from enforcing noncompete agreements against their workers. Determining that noncompete agreements are an unfair method of competition under Section 5 of the FTCA, employers may not seek to enforce existing agreements and are forbidden to require new or existing employees from entering into a new agreement not to compete with their employer.

Employers have 120 days from the day the rule was voted on to be in compliance with releasing former and existing employees subject to the employers noncompete agreement, whether that is in a stand-alone document or in the employment handbook, or elsewhere found.

Exceptions

There are two notable exceptions to this new rule. The first pertains to the buying/selling of a business. If your business is in the middle of being purchased or is about to be purchased, you may be exempted from the notice requirements.

Additionally, senior executives who earn more than $151,164 and are in "policymaking" positions are exempt from this new rule.

Compliance

Employers must release former and current employees from their noncompete agreements by the 120th day from the day the rule went into effect. It is recommended that the Human Resources department begin working on this project as soon as possible. List all current and former employees subject to a noncompete agreement no matter what form it is in and draft a release letter. (Our firm has a template available to those who need one.)

Send via email or USPS mail a letter releasing the current and former employees from the noncompete language from your company. Further, we strongly suggest a review of all existing handbooks and new hire paperwork so that this language may be identified and removed. Document your processes, dates worked, personnel involved, and tracking information for all email and USPS notifications. This will preserve any evidence you need in the event an employee (past or present) reports your company for non-compliance.

If you have questions, would like a draft of the notice of release, or would like to discuss in more detail, please email info@lojrs.com or contact us at 682-900-1799 to make an appointment with an attorney who can talk you through this process.