The business landscape is set to undergo a significant shift in early September with the Federal Trade Commission’s (FTC) recent comprehensive ban on new non compete agreements between employers and workers, including senior executives. As a business leader, it’s crucial to understand the implications of this new rule, which is set to take effect on September 4, 2024, and how it will impact your company, your employees, and the broader economy.

Under the final Noncompete Rule, the FTC has deemed it an unfair method of competition (in violation of “Section 5” of the Rule), for employers to enter into non-compete agreements with their employees. This blanket ban applies to all new employment agreements, regardless of an employee’s position or salary. However, the rule takes a nuanced approach to existing non-compete agreements. For the small percentage of workers classified as senior executives (defined as those earning more than $151,164 and holding a “policy-making position”), existing non-compete agreements can remain in force. For all other workers, existing non-compete agreements will become unenforceable after the rule’s effective date.

Even as this new rule is challenged in the courts, as a business owner, it’s wise to start preparing for the new reality that will take shape once the rule goes into effect.

First step is to review your current non-compete agreements and determine which ones will remain enforceable under the new guidelines. Have your employment contracts and policies updated to ensure compliance with the ban on new non-compete agreements. You also might consider alternative methods for protecting your business interests, such as robust non-disclosure agreements or strengthening your Intellectual Property portfolio, including trade secret protections.

The FTC non-compete ban may present challenges for some businesses – particularly those that have heavily relied on these agreements to retain talent and safeguard their competitive edge. As you navigate this new landscape, the attorneys of Wegman Hessler Valore remain ready to assist you. By understanding the implications of the new rule and taking proactive steps to adapt, you can position your company to thrive in the more competitive and innovative business environment that lies ahead.

—

Wegman Hessler Valore specializes in business law for business leaders, applying legal discipline to solve business problems to help leaders run smarter. For over 50 years, this Cleveland law firm has provided full-service strategic legal counsel for closely held businesses, corporations, and individuals. Practice areas include: business law; municipal law; litigation; corporate governance; estate planning and wealth protection; intellectual property; family law for business owners; HR and employee matters; commercial real estate; business acquisition, and more. Get in touch to learn more.

Visit wegmanlaw.com or call us at (216) 642-3342.

Copyright © Wegman Hessler Valore. This information is for educational purposes. It does not reflect an attorney-client relationship with the author(s) or the firm. This information should not be used as a substitute for professional legal advice in specific situations.