On April 23, 2024, the United States Federal Trade Commission voted – 3-2 – to adopt a rule all but banning employment noncompete agreements. The rule is slated to go into effect 120 days after its publication in the Federal Register. The rule would allow existing noncompetes with senior executives, defined as workers earning more than $151,164 annually and who are in policy-making positions, to remain in force. Once the rule takes effect, employers would be banned from entering into noncompetes with employees, even with senior executives.

Under the rule, employers will also be required to provide notice to workers other than senior executives who are bound by an existing noncompete that they will not be enforcing any noncompetes against them. The United States Chamber of Commerce has said it will sue to block the rule, and injunctive proceedings against the proposed rule may occur as soon as this week.  Looking down the road, the proposed rule may face a significant hurdle in that the U.S. Supreme Court favors the “major questions” doctrine, which limits the Executive Branch’s ability to impose material changes to the law without explicit Congressional authorization. 

Ice Miller will continue to monitor these developments. For the time being, employers need not take any action, but may wish to consider entering into noncompete agreements with their senior executives before it’s too late to do so. Assuming the rule survives court scrutiny, employers should also consider entering into confidentiality/non-disclosure agreements – agreements not prohibited by the rule -- with certain employees. 

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.