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On April 23, 2024, the Federal Trade Commission issued a broad Final Rule that effectively bans noncompete clauses nationwide. The FTC states that noncompete clauses are an unfair method of competition and violate Section 5 of the Federal Trade Commission Act. This ban does not cover such clauses already in place for senior executives that earn more than $151,164 annually and who are in policy-making positions. The ban goes into effect 120 days after the publication of the rule in the Federal Register. The rule requires employers who used noncompete agreements to notify their workers that they will not be enforcing noncompete clauses against them. The final rule does not apply to noncompetes entered into by a person pursuant to a bona fide sale of a business entity.

Business groups, like the U.S. Chamber of Commerce, have said that they will challenge the rule in court.

For further insights, read our accompanying Antitrust Alert, and keep an eye out for our upcoming Breakfast with Bradley session on June 13, where we’ll delve deeper into noncompetes.