New Federal Ban on Noncompete Agreements-New Federal Ban on Noncompete Agreements Recording

Video Transcription

Video Summary

The webinar focused on the new Federal Trade Commission (FTC) ban on non-compete agreements, effective September 4, 2024. The speakers, attorneys Andrew Kilberg and Julian Kleinbrott of Gibson, Dunn, and Crutcher, provided an overview of the rule, its legal background, litigation challenges, key provisions, exceptions, and business implications.<br /><br />Non-compete agreements, historically enforceable across most states, are now broadly banned by the FTC with limited exceptions. The ban prohibits entering, enforcing, or representing non-competes for all workers, broadly defined to include employees, contractors, and even volunteers. The rule applies functionally, capturing not only explicit non-compete clauses but also related agreements (e.g., certain NDAs, severance, or training repayment clauses) that restrict a worker's ability to seek or accept new work or start a business in the U.S. Employers must notify impacted workers that existing non-competes are void.<br /><br />Key exceptions include existing non-competes for senior executives (defined narrowly by compensation and policymaking authority) and bona fide sales of a business. The rule preempts less restrictive state laws, though more restrictive states (e.g., California) may still apply their law.<br /><br />Two lawsuits challenge the rule's validity, arguing the FTC lacks authority and raising constitutional and procedural concerns. A preliminary injunction decision is expected by July 3, 2024.<br /><br />Employers are advised to review all contracts, handbooks, and policies to identify potentially covered clauses and prepare to issue required notices. Alternatives like narrowly tailored NDAs and retention bonuses may help protect business interests without violating the ban. The FTC’s broad, functional test and lack of waiver options create compliance challenges, and organizations should consult legal counsel and carefully plan for the rule's possible implementation.

Keywords

Federal Trade Commission

FTC non-compete ban

non-compete agreements

employment law

legal challenges

contract review

business implications

exceptions to ban

compliance strategies