21 May 2024
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US sounds the death-knell on non-compete clauses

To The Point
(5 min read)

On 23 April 2024, the United States Federal Trade Commission (“FTC”) issued a Final Rule to prohibit the use of non-compete clauses with most American workers. The Final Rule is scheduled to go into effect 120 days following its publication in the Federal Register, however, substantial legal challenges may result in delay or invalidation of the Final Rule before the Effective Date.

What is the effect of the Final Rule?

Following the effective date of the FTC final rule, employers will be prohibited (with limited exceptions) from (i) entering into (or attempting to enter into) non-compete clauses with workers, (ii) enforcing (or attempting to enforce) non-compete clauses with workers, and (iii) representing that a worker is subject to a non-compete clause.  

Under the FTC final rule, a non-compete clause is defined as a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from: (i) seeking or accepting work in the U.S. with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (ii) operating a business in the U.S. after the conclusion of the employment that includes the term or condition.

Are there any exceptions?
What is the effect of legal challenges to the Final Rule?
Are other types of restrictive covenants affected?
Does the Final Rule apply to workers outside the US?
Why has the FTC taken this step?
Might this influence the position in the UK?

To the Point 

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