New FTC Rule on Non-Compete Agreements

Business owners in South Florida and throughout the country should be aware of a final rule issued by the Federal Trade Commission (FTC) concerning noncompete agreements. In short, an FTC press release indicated that the final rule is designed “to promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.” In short, noncompete agreements will no longer be possible in any industry in Florida or elsewhere in the country. Our West Palm Beach business law attorneys can tell you more about the FTC’s new rule, and we can answer any questions from your business today.

What is a Noncompete Agreement? 

To have a clear understanding of the implications of the new FTC final rule, it is essential to know what a noncompete agreement is and how it is designed to work. A noncompete agreement is one type of restrictive covenant, or an agreement between an employer and employee that restricts the employee’s actions in some capacity in order to protect the business interests. There are different types of restrictive covenants, and a noncompete agreement more specifically is an agreement that usually prevents a worker from taking a new job in the same or similar area to work for a competitor or to start their own business in the same or similar industry for a particular period of time. The intention of the agreement is to protect the business interests of the original employer so that the employee cannot take the information obtained through the employer’s business and use it for themselves or for a competitor, to the detriment of the original employer.

As the FTC explains in its new press release, however, “noncompetes often force workers to either stay in a job they want to leave or bear other significant harms and costs, such as being forced to switch to a lower-paying field, being forced to relocated, being forced to leave the workforce altogether, or being forced to defend against expensive litigation.”

Implications of the FTC Final Rule 

What are the implications of the FTC’s final rule? In short, the majority of the 30 million workers in the United States who are current subject to noncompete agreements (about 18 percent of all American workers) cannot have those agreements enforced against them once the rule takes effect. To be clear, existing noncompetes largely will become unenforceable, and employers will not be able to require employees to enter into new noncompete agreements.

As the FTC emphasizes, employers will still have options to protect business interests, including laws that protect trade secrets and non-disclosure agreements (or NDAs).

Currently, the rule is set to take effect 120 days following publication in the Federal Register. However, it is important for businesses to keep an eye on developments because the new rule is already facing challenges.

Contact Our West Palm Beach Business Lawyers Today 

If your business has any questions or concerns about noncompete agreements, the implications of the new FTC rule, or how to handle any existing agreements with employees, it is important to seek legal advice. An experienced West Palm Beach business law attorney at Kelley Kaplan & Eller, PLLC talk with you today to learn more about your concerns and can provide you with detailed information about your business’s rights and responsibilities in relation to restrictive covenants and noncompete agreements in South Florida.

Source:

ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes