FTC Bans Non Compete Agreements

Non-competition agreements have been banned by the Federal Trade Commission (FTC).  Under the new rule, the vast majority of existing and future noncompetition agreements for both W-2 employees and independent contractors will not be enforceable.  Failure to comply with the rule could subject a company to fines, penalties, and injunctive relief.

The rule does leave some important protections in place for businesses, e.g., non-competition agreements are permissible in the sale of a business, trade secret laws remain in force, and non-disclosure agreements and non-solicitation agreements are permissible. 

These protections would still allow entrepreneurs to shield their proprietary and confidential information.  But, per the FTC, those protections cannot be used as the functional equivalent of a non-competition.  Businesses must take care in navigating a potential overlap between prohibited non-competition agreements and permitted protections.

The ban is scheduled to go into effect in four months unless a court blocks the implementation of the rule.  It bears noting that there are already a number of pending litigations on the matter and that any one of them could delay the implementation of the ban.

For more information about this article or other issues, please contact us The Bachman Law Firm PLLC at kristine@thebachmanlawfirm.com or 845-639-3210.