Major Shift in Employment Law: Understanding the FTC's New Rule on Non-Competes

The Federal Trade Commission (FTC) has recently issued a groundbreaking final rule that changes the landscape of employment agreements across the United States. This new regulation, which will take effect 120 days after its publication in the Federal Register, introduces significant modifications to how non-compete clauses are handled in employment contracts. Here's what you need to know about the new rule and how it affects both employers and employees.

Overview of the New Rule

Non-compete clauses have traditionally been used by employers to prevent employees from joining competitors or starting similar businesses shortly after leaving a company. However, under the new FTC rule, such clauses are set to change dramatically. The rule declares it unlawful for employers to enter into non-compete agreements with workers post the rule's effective date. Moreover, for existing non-compete agreements, there are distinct treatments based on the employee's position:

  • Senior Executives: Non-compete agreements with senior executives entered before the rule's effective date remain enforceable.
  • Non-Senior Employees: All existing non-compete clauses with non-senior employees become unenforceable, and employers are required to inform these workers that their non-compete agreements are no longer binding.

Implications for Employees

This rule empowers non-senior employees by enhancing their job mobility and freedom to innovate. By removing the barrier of non-compete clauses, employees can now explore new employment opportunities or even start their own ventures without the fear of legal repercussions. This is expected to foster a more dynamic and competitive market, potentially leading to better job offers and conditions for workers.

Implications for Employers

Employers need to revisit their strategies for protecting proprietary information and retaining talent. With the inability to enforce non-compete agreements against most employees, businesses might focus more on strengthening non-disclosure (NDA) and non-solicitation agreements. It's crucial for employers to adjust their human resources policies and contract management practices to align with this new rule. Compliance will require proactive communication to ensure that all employees are aware of these changes and understand their rights and obligations.

Does This Include Non-Solicitation or Non-Disclosure Agreements?

It's important to note that the FTC's rule specifically targets non-compete clauses. Non-solicitation and non-disclosure agreements are not affected by this rule and remain viable tools for employers to protect their business interests. Employers should consider these alternatives more heavily in their contractual agreements post-rule implementation.


The FTC's new rule on non-compete agreements marks a significant shift in employment law, aimed at boosting market competitiveness and worker mobility. Both employers and employees must understand the nuances of this rule to navigate the changing legal landscape effectively. For workers, this could mean greater career flexibility and opportunities. For employers, adapting to this change will be key to maintaining a competitive edge in attracting and retaining top talent.

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