NSBA supports flexibility for small-business owners when it comes to non-compete policies.
NSBA supports flexibility for small-business owners when it comes to non-compete policies.
On April 23, 2024, the Federal Trade Commission (FTC) issued its Final Non-Compete Agreement Rule (Final Rule), banning non-compete agreements between employers and their workers, specifically those that utilize non-compete agreements to protect their trade secrets, confidential business information, goodwill, and other important intangible assets.
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The rule bars employers from entering or attempting to enter into a non-compete agreement with “workers” (employees and independent contractors). Employers are also prohibited from even representing that a worker is subject to such a clause.
There are few exceptions under the new rule, including for senior executives, whose existing non-compete agreements can remain in force, however employers are barred from entering or attempting to enter into a non-compete agreement with a senior executive after the effective date.
The rule has already been challenged in at least two lawsuits, one by the U.S. Chamber of Commerce, and a second filed by Ryan, LLC, a tax services firm. Both suits raise similar arguments, including that the FTC lacks authority to enact the rule, as well as its retroactive nature.
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NSBA is continuing to monitor developments related to this rule and remains supportive of small-business owners being able to utilize policies most serving of their enterprise.
Read the full rule here.
