By: Thomas Law Group On: May 14, 2024 In: Business/Employment Comments: 0

On April 23, 2024 the Federal Trade Commission(“FTC”) voted 3 – 2 to approve their 2023 proposal (with some modifications) as the “Final Rule” to essentially ban non-compete agreements in employment. The Final Rule defines non-compete clauses as a provision that “prohibits a worker, penalizes a worker for, or functions to prevent a worker from working in the U.S. with a different entity after the worker’s employment/engagement ends with the hiring company. This ban will significantly impact both employees and employers throughout the country. In Ohio the ban will make what was previously still legal and enforceable (if the restrictions are reasonable) now illegal and no longer enforceable.

The Final Rule now having been published in the Federal Register will go into effect September 4, 2024. On and after that effective date employers will be prohibited from entering into any new non-compete agreements with any workers (both employees and independent contractors). Prior to the effective date of the Final Rule, employers will have to notify all workers who currently have non-compete agreements that their non competes are no longer enforceable as of the effective date of the Final Rule. There are some exceptions to the Final Rule. While certain industries are excepted from compliance with the Final Rule, generally for-profit businesses that are not otherwise excepted from compliance with the Federal Trade Commission Act, will have to comply. The Final Rule specifically provides a limited exception for senior executives (workers who are paid as their annualized compensation at least $151,164.00 and have been in a policy making position with the employer). Current non-competes with such senior executive workers will remain enforceable (no notification by employer required), but future non-compete agreements with senior executives workers will be prohibited. The Final Rule also provides an exception for non-competes included as part of a bona fide sale of a business or a worker’s ownership interest in a business.

Challenges have already been filed and more may come. The day after the FTC approved the Final Rule, the U.S. Chamber of Commerce filed a lawsuit against the FTC asserting that the FTC lacks the authority to issue the Final Rule asserting such authority by the FTC is an unconstitutional delegation of legislative power. The result of these challenges may, among other things, have the effect of delaying enforcement of the Final Rule.

If you have any questions about your current non-competes, whether as an employer or employee, our attorneys at Thomas Law Group will remain apprised of these changes and are ready to answer any questions and assist you in navigating the Final Rule.