The Federal Trade Commission (FTC) established its final version of a rule that bans nearly all non-compete agreements. It passed on April 23. It means that most agreements of this type are no longer allowed, and it will also ban almost all agreements already in place.
The ruling will change a lot of employees’ relations with their employers, which includes independent contractors. Once the rule becomes effective on Sept. 4, agreements that already exist cannot be enforced, and new contracts cannot be made. Some exceptions to these hard and fast rules do exist.
Senior Executives not Affected by Ruling
The individuals it will not affect are senior executives. These individuals, if they are under a non-compete agreement, are defined as someone who is given a total compensation of at least $151,164 in the previous year (excluding fringe benefits) and is in a policy-making position.
People Affected Must Be Notified
The FTC also requires that employers notify all people affected by it. Employers must contact them in person, through email, texts, or in writing—if they have any contact information. The notification must state that the non-compete agreement cannot be and will not be enforced against the employee.
Nondisclosure Agreements, Non-Solicitation Agreements, and Repayment Agreements
These agreements that an employee may be required to sign are not under the new rule because they deal with different matters. They are illegal if they contain clauses with the same type of provisions that a non-compete agreement would have. State law may also affect these documents.
