FTC Issues Ban on Noncompete Agreements — but Experts Say Rule Will Face Legal Challenges

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The Federal Trade Commission on Tuesday issued a final rule banning noncompete clauses in employment contracts in the U.S. But experts in the field said the FTC‘s move will definitely be challenged in court.

Under the FTC’s new rule, if it goes into effect, existing noncompete agreements for the “vast majority” of workers will no longer be enforceable. Existing noncompetes for employees deemed to be senior executives — who represent less than 0.75% of workers, according to the agency — can remain in force under the FTC’s final rule, but employers will be prohibited from entering into or attempting to enforce any new noncompetes, even if they involve senior executives. Employers will 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.