FTC Issues Ruling on Noncompete Agreements
Back in January I posted about the status of noncompete agreements in New York. While New York was considering how to handle them moving forward, the Federal Trade Commission (“FTC”) stepped in, issuing a Final Rule that essentially bans noncompete agreements nationwide. As set forth in the FTC press release, once the rule becomes effective (120 days after it is published in the Federal Register) existing noncompete agreements for all workers except for “senior executives” will no longer be enforceable. The FTC defined “senior executives” as employees making more than $151,164 annually who are in “policy-making positions.” Further, employers are banned from entering into or attempting to enforce any new noncompete agreements, including with senior executives.
It is important to note that while noncompete agreements will no longer be enforceable, New York employers still have other means to protect their business from unfair competition. For example, the federal Uniform Trade Secrets Act and New York common law provide significant protections to employers against the misappropriation of business trade secrets. Further, the FTC Rule does not disturb existing Non-Disclosure Agreements (“NDAs’), which can still serve to prevent employees from disclosing certain information learned during their employment to competitors. This rule does not prevent businesses from protecting their legitimate business interests – rather, it appears to be designed to eliminate the use of noncompete agreements by employers to artificially restrict the mobility of employees.