FTC Ban on Non-Competes

TAKING EFFECT SEPT 4

Compass recently met with our employment attorney, from the law firm Duane Morris, regarding the upcoming national ban on non-competes. Below is a recap of that conversation…

In April 2024, the Federal Trade Commission voted 3-2 to approve a FINAL RULE:

• Banning non-compete agreements with virtually all workers as of September 4, 2024;
• Invalidating existing non-competes with all workers except senior executives; and
• Requiring employers to send a notice to affected workers, by the effective date, that the worker’s non-compete clause will not and cannot be legally enforced.

While there are a few legal challenges still pending in the courts, all previous legal challenges to the non-compete ban have been unsuccessful. 

Most Compass clients have gotten rid of non-compete language in their employment agreements, but we still occasionally run across them when evaluating compensation plans. Non-solicit language is still legal in most states if the language is reasonable.

Employers should take the following steps ahead of the September 4, 2024 effective date, if they have not done so already (from Duane Morris):

• Identify a designated individual or individuals to speak on behalf of the company regarding the rule and develop consistent messaging to workers;
• Work with counsel to review agreements with current and former workers to determine which agreements would fall within the non-compete rule;
• Work with counsel to craft the notice that must be sent to affected workers on or before the effective date; and
• Work with counsel to review agreement forms to assess potential changes to those forms for use after the effective date.

About Compass

Compass is dedicated to serving community banks and credit unions, specifically supporting their efforts in offering comprehensive private wealth, securities, insurance, and other wealth management and advisory services. Central to our mission is bridging the gap between the major Wall Street firms and the banks and credit unions that serve the public at the community level. To learn more about Compass’ services, visit our website www.compassconsulting.com, or call 760-477-1299.

Disclaimer: Compass is not a law firm, and our officers and staff are not attorneys. This content is for informational purposes only and is not offered as legal advice.