FTC Final Rule Banning Most Noncompete Clauses Effective September 4

The Federal Trade Commission (FTC) approved a Final Rule banning noncompete clauses for almost all workers, effective 120 days following the Rule’s publication in the Federal Register. On May 7, 2024, the Final Rule was published in the Federal Register and will therefore become effective on September 4, 2024 (Effective Date).

Subject to ongoing legal challenges, the Final Rule will require employers who entered into noncompete clauses with workers to provide clear and conspicuous notice by the Effective Date that any subject noncompete clause will not be, and cannot legally be, enforced against any covered worker.

In addition to identifying the employer, the notice must be communicated either on paper delivered by hand to the worker, by mail at the worker’s last known address, or by email or text message to the worker.

While the Final Rule faces strong statutory and constitutional challenges which may delay and ultimately enjoin the Effective Date, employers should nonetheless take inventory of all agreements, policies, and plans that may contain noncompete clauses subject to the Final Rule and determine which employees will need to receive the required notice by the Effective Date.

For further information on the Final Rule, refer to our April 24 LawFlash and May 1 blog post.

NEXT STEPS

Morgan Lewis is closely monitoring the legal challenges the Final Rule is facing and whether these challenges will pause the enforcement of the Final Rule.