Federal Government Bans Noncompete Employment Agreements

The Federal Trade Commission voted 3-2 Tuesday to issue a final rule that would prohibit the enforcement of most noncompete agreements.

According to draft text published by FTC, the rule provides that it is a violation of federal antitrust laws for employers to enter into noncompetes with workers on or after the rule’s effective date. Existing noncompetes with senior executives may remain in force, but those with other workers are not enforceable after the effective date.

The final rule will take effect 120 days from the date of publication in the Federal Register, meaning it in could be in force as soon as late August.

In a public meeting convened Tuesday to vote on the rule, Benjamin Cady, attorney at the FTC’s office of policy planning, said the agency estimated that approximately 1 in 5 U.S. workers is subject to a noncompete agreement, or about 30 million workers total. The commission said it received some 26,000 public comments in response to the proposed rule, with about 25,000 of these being supportive of the rule.

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