The following news comes to us from the Cascade Employers Association
In January of 2023, the Federal Trade Commission (FTC) issued a proposed rulemaking that would virtually ban non-compete agreements and supersede all state laws relating to non-compete agreements. On April 23, 2024, the FTC finalized the rule with some modifications from the proposed rule. This rule takes effect 120 days after being published in the Federal Register.
Specifically, the FTC’s non-compete rule mandates the following:
- Employers are prohibited from entering into new non-competes with workers on or after the effective date.
- Employers are prohibited from enforcing existing non-competes with workers other than senior executives.
- The final rule defines the term “senior executive” to refer to workers earning more than $151,164 who are in a policy-making position. Policy-making position means a “business entity’s president, chief executive officer of the equivalent, any other officer of a business entity who has policy-making authority, or any other natural person who has policy-making authority for the business entity.”
- Employers must provide both current and former employees with a clear and conspicuous notice to the worker by the effective date that the worker’s non-compete clause is no longer in effect and will not be, and cannot be enforced. Employers may provide notice on paper, by mail, email, or text message; and employers are exempt from the notice requirement where the employer has no record of a street address, email address, or mobile telephone number for the worker. The FTC provides safe harbor model language in a document linked here under “Model Notices.”
Even though this non-compete ban could take place as early as August 22, 2024, legal challenges are expected. However, employers should still prepare for this ban to take effect. In preparing, employers should examine all active non-compete agreements to see if there is a “senior executive” exemption. If the exemption does not apply, employers should prepare to send out notices. It is important to note that this rule is more restrictive than Oregon’s non-compete legislation. If and when the rule takes effect, Oregon and Washington employers will need to follow the FTC rule as it will supersede state laws.