FTC to Vote on Non-Compete Ban

The Federal Trade Commission will host a virtual Open Commission Meeting next Tuesday, April 23, 2024, at 2pm ET to vote on a final rule to ban non-compete agreements in employment contracts. 

Quick overview: The proposed rule, issued by the FTC in January 2023, seeks to eliminate the use of non-compete agreements. If adopted as proposed, the final rule’s effective date will be 60 days after the final rule is published in the Federal Register. Thereafter, employers will have 180 days (6 months) after publication to comply with the new law by rescinding existing non-compete agreements. The rule would also preempt lesser state laws governing non-competes – state laws more prohibitive than the final rule would not be preempted. 

HRPA provides input: HR Policy staff met with FTC Commissioners last year and filed comments expressing our concerns with the Commission’s proposal to prohibit the use of non-compete agreements. We argued that the FTC lacks the statutory authority to issue the rule and emphasized the benefits of reasonably tailored non-compete agreements, including safeguarding trade secrets and investments in employee talent. We also urged the Commission to, at minimum, exempt executive-level employees and those with access to trade secrets from any prohibition.

Watch the meeting online: The Commission will not be accepting public comments during the April 23 meeting. Find the FTC’s announcement and link to watch the meeting here. The event will be recorded, and the webcast will be accessible on the Commission’s website.

Outlook: HR Policy Association will send a member communication with developments following the FTC’s open meeting next week. It's not yet clear if the final rule will be the same as the proposed rule, or if the Commission will adopt HRPA's suggestions, including lengthening the employer compliance period. The final rule is expected to face numerous legal challenges, as highlighted by former FTC Commissioner Christine Wilson, the sole dissenter of the Commission's proposal. Commissioner Wilson cited legal questions challenging the Commission’s authority and Congressional authorization to undertake this initiative.